Shares in British insurance firm RSA have plunged after Zurich pulled out of a £5.6 billion takeover bid.

Zurich announced in July that it was considering a bid for its UK rival. The Swiss firm said the decision to pull out was not due to anything unexpected in the due diligence process.

It is understood that the impact and cost of the explosion in Tianjin has left Zurich unable to afford the takeover. The container storage explosion it set to cost Zurich around $275 million (£177m), resulting in a $200m loss in its general insurance business alone.

"Given the deterioration in profitability in certain parts of the General Insurance business, and following his appointment as General Insurance CEO, Kristof Terryn is conducting an in-depth review of the business," Zurich said.

RSA's shares dropped 22% after news of Zurich pulling out.