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UPDATE 1-Unipol appeals antitrust terms for FonSai merger

* Appeal means asset sale process temporarily halted

* Regulator had placed 30 pct share cap on various segments

* New group would have 37 pct of car insurance segment

(Recasts lead, adds details)

MILAN, Oct 11 (Reuters) - Insurer Unipol has lodged an appeal against conditions laid down by Italy's competition watchdog to clear its planned takeover of peer Fondiaria-SAI to create Italy's No. 2 player, two sources familiar with the matter said on Thursday.

The appeal filed with an Italian administrative court means the procedure for the sale of assets by Unipol, which has been requested by the antitrust authority, is temporarily suspended until a ruling by the court is made, the sources said.

"There has been an appeal," one of the sources said, adding that the cap placed on the new group's market share in the auto insurance business was perceived as overly tough.

Fondiaria is Italy's leading motor insurer and merging it with Unipol would create a company with around 37 percent of this segment and 32 percent of the non-life insurance market.

On June 20 the antitrust regulator called on Unipol to dispose of assets so as not to exceed the 30 percent threshold in the various domestic insurance segments.

To meet competition watchdog demands, Unipol had previously said it was ready to sell policies attracting 1.7 billion euros of annual premiums.

In January investment bank Mediobanca crafted a deal for Unipol to save the faltering Fondiaria. The merger is slated to be operative on Jan. 1, 2013.

On Wednesday antitrust head Giovanni Pitruzzella said there were various deadlines for Unipol's commitments, adding the more "industrial" operations had been put back to 2013.

Among the conditions laid down by the regulator is an undertaking by Unipol to sell a 3.8 percent stake in Mediobanca before the end of 2013.

Bologna-based Unipol, controlled by a group of cooperatives, will own around 67 percent of the new company when formed.

Filings from market regulator Consob on Thursday showed that some cooperatives had raised their stakes in Unipol following the purchase of preference shares left unsold after the insurer's 1.1 billion euro rights issue.

The Lima cooperative raised its stake in Unipol to 4.55 percent from 3.12 percent while the Coop Adriatica and Nova Coop had 3.315 percent and 2.308 percent respectively.

(Reporting By Andrea Mandala, writing by Stephen Jewkes, Editing by Lisa Jucca)

((stephen.jewkes@thomsonreuters.com)(+39.0266129695)(Reuters

Messaging: stephen.jewkes.thomsonreuters.com@reuters.net))

Keywords: UNIPOL ANTITRUST/