Prudential and Paragon Bank are bidding for a £3bn tranche of the £12.5bn book of Bradford & Bingley buy-to-let mortgages owned by the Government.
The Financial Times reports the insurer is one of a group of bidders that include Paragon Bank, US asset manager Pimco, private equity firms Blackstone and Cerberus and hedge funds CarVal, Elliott and Och-Ziff.
Government body UK Asset Resolution is running the sale, and the deadline for bids is today. The results will be announced from next week.
UKAR has told bidders that it wants to sell the B&B mortgages to more than one group.
Elliott and Och-Ziff are bidding together, while CarVal, Paragon and Pimco have also joined forces.
The £12.5bn book forms part of a wider £16bn mortgage portfolio, with the additional £3.5bn being mortgages in default.
The Government bailed out B&B when the firm collapsed in 2008.
Most large UK banks have avoided the auction because of regulatory scrutiny over their existing buy-to-let mortgage books.
The Bank of England said last year it thought parts of the buy-to-let market were risky and that it was monitoring the sector closely.