HONG KONG/SEOUL (Reuters) - China Life Insurance 601628.SS and China Taiping Insurance 0966.HK have expressed initial interest in acquiring ING Life Insurance Korea in a sale that could fetch about $3 billion, two sources with direct knowledge of the deal said on Monday.

Chinese interest in South Korea’s fifth-largest life insurer underscores the continued appetite of mainland insurers for overseas assets as they look to diversify their country risk.

A sale could mark the biggest insurance takeover in South Korea, which according to the Sigma World Insurance Report ranked as the eighth largest life insurance market by premium income in 2014.

The sources said there was still some gap between what Chinese insurers are offering and what private equity seller MBK Partners is willing to accept.

One source said the bids range from 2 trillion to 3 trillion won ($1.7 billion to $2.5 billion).

MBK acquired the Korean life insurance arm of Dutch insurer ING Groep ING.AS in 2013 for 1.8 trillion Korean won ($1.51 billion). At the time, MBK agreed to use the ING brand for five years.

While the business has improved since MBK acquired it, its return on equity of 8-9 percent makes it less attractive to some bidders unless MBK lowers the price, a separate source said.

An initial bid for ING Life from South Korea’s Kyobo Life Insurance was rejected by seller MBK Partners, one of the sources said.

The sources declined to be identified as the sale process is confidential.

With Kyobo’s bid out, seven bidders who submitted letters of interest remain in the race, including five from China, one from Korea and one from Europe, South Korean deal-focused media Market Insight reported on Monday, citing investment banking sources.

China's Anbang Insurance Group [ANBANG.UL] last year took a 63 percent stake in Korea's Tongyang Life Insurance 082640.KS for 1.1 trillion won and this April it bought German insurer Allianz's ALVG.DE Korean businesses for more than $3 million.

ING Life Insurance Korea has 30 trillion won in assets and had a book value of 4.2 trillion won at the end of 2015. It has a lower percentage of high-interest fixed-rate products than the industry average, products which have weighed on life insurers in Korea, the company has said.

MBK Partners, sellside advisor Morgan Stanley and China Taiping declined to comment.

A Kyobo Life spokesman did not have an immediate comment.

China Life officials said they were not aware of the bid.