New Zealand’s Commerce Commission is due to announce on Wednesday whether it will approve IAG’s takeover of Lumley NZ, with speculation IAG is being pressured to sell off some assets.

The acquisition announced in December of Wesfarmers’ insurance assets for $1.845 billion gained quick approval in Australia, but has drawn far more opposition in New Zealand, where Lumley NZ is the third-largest insurer.

Brokers say IAG will control about 52% of the market if it can buy Lumley NZ, and that competition is already limited following the Christchurch earthquakes. The Insurance Brokers Association of New Zealand (IBANZ) and a number of other significant business groups parties have opposed the sale.

The Commerce Commission has postponed its decision three times pending discussions with industry players.

IBANZ CEO Gary Young says the commission has gained a deeper understanding of the industry since it began talking to groups that made submissions to its inquiry into the Lumley acquisition.

“A key issue is having one company cover 50% of New Zealand’s assets,” he told insuranceNEWS.com.au.

IAG already owns leading commercial insurer NZI and personal lines specialist State Insurance, as well as AA Insurance and Christchurch-based AMI.

There is speculation IAG NZ might offer to divest some residential business, but it’s not expected to be enough to satisfy brokers.

They say insurers are already less willing to write cover in areas outside Auckland, making it hard for them to source alternative quotes.

“Companies such as AIG, Allianz, QBE and Zurich are either not writing business in this part of the market or are cherry-picking risks,” Mr Young said.

“As a result, Lumley has been a key option for brokers.”

IBANZ says the concentration of insurance business is greatest in personal lines and motor, where IAG will hold a 66% market share if it acquires Lumley.

However, IAG CEO Mike Wilkins says he still expects the transaction to be completed by June 30. He says it is “understandable that a major acquisition of this type [is] attracting careful consideration”.

New Zealand’s Overseas Investment Office gave its consent to the takeover last month, but the prudential regulator, the Reserve Bank, must also approve the deal.

The Australian Prudential Regulation Authority and Federal Treasurer Joe Hockey also have to approve the takeover of Wesfarmers’ insurance underwriting assets in Australia – although the sale is not expected to be an issue.