Does anyone offer activist insurance? London hedge fund Algebris Investments is taking aim at Italy’s largest—and Europe’s third-largest—insurer, demanding improved corporate governance and increased shareholder returns.

In a letter sent to Trieste-based Assicurazioni Generali, Algebris, founded last year by well-known investors Eric Halet and Davide Serra, complained that Generali achieves only about 60% of its potential earnings. Worse still, if it follows current targets set for 2009, it will still only achieve 75% of its potential.

“Generali is at risk of falling further behind other major European insurers,” Algebris wrote in the letter, and called on the company to follow the lead of its larger rivals, Axa and Allianz, in financial reporting practices. Algebris also called for “more robust corporate governance,” including splitting the CEO and chairman jobs.

Algebris owns just 0.3% of Generali, but said in the letter is could boost its stake to 1%.

Further, the hedge fund wants assurances on avoiding conflicts of interest with Generali’s largest shareholder, Mediobanca, which owns a 16% stake in the insurer.

“We expect the company to be free from any significant influence by Mediobanca and Mediobanca’s shareholders,” it wrote.