MILAN (Reuters) -Italy's second-biggest bank UniCredit said it had brought its Italian life insurance business in house and will apply for capital relief measures known as 'Danish compromise' for banks that own insurers.

Under CEO Andrea Orcel, UniCredit is looking for ways to boost fee income and has bought out its life insurance partners in Italy, taking full control of its local joint ventures with CNP Assurances and Allianz.

The two transactions will help the bank add 400 million euros in yearly insurance revenues by 2027 compared with 2024.

The Italian joint-venture with France's CNP is now called UniCredit Life Insurance (ULI) and the one with Allianz has become UniCredit Vita Assicurazioni (UVA), it said.

Both will be led by group insurance head Alessandro Santoliquido. ULI and UVA are expected to merge in 2026, it said in a statement.

UniCredit said the resulting entity would hold a leadership position in high-value segments such as unit-linked and term life policies.

UniCredit said it would apply to be classed as a financial conglomerate, subject to enhanced supervision, to benefit from the favourable Danish Compromise capital rules which have now become permanent under European Union rules.

The Danish Compromise reduces the burden for banks of owning an insurer by letting them hold capital against insurance assets on a risk-weighted basis rather than deducting them in full from their capital.

In non-life, UniCredit will continue to partner with Allianz through the joint venture UniCredit Allianz Assicurazioni.

The capital hit of 25 basis points from Friday's move announced on Friday will be offset once UniCredit is classed as a financial conglomerate and secures the Danish Compromise benefits, it said.

(Reporting by Valentina Za, Editing by Louise Heavens)