Suncorp says its proposed $NZ219 million ($203 million) acquisition of Tower would not give it market dominance in New Zealand, with IAG retaining top position in a competitive environment.

In a submission to the competition regulator the insurer says IAG has about 45% of the New Zealand general insurance market, while Suncorp’s share after buying Tower would increase to 30% from 25%.

“There will be no ability for Suncorp to exercise market power in the context of that market structure and the minimal level of aggregation will make no effective difference to that dynamic.”

The expanded share would still be “significantly smaller” than IAG’s before it was given approval by the Commerce Commission to acquire Lumley NZ in 2014.

Suncorp says its closest competitors in home and contents cover are the IAG brands AMI and State Insurance, plus Youi.

Tower is a small player in commercial lines and does not participate in the broker market.

Suncorp says the merger would help it increase efficiencies in an insurance market that has become more competitive since the start of 2014.

In the commercial area, it notes aggressive growth by international companies such as AIG, Allianz, QBE and Chubb, plus the arrival of new market entrants such as Ando – an insurer set up by former Lumley CEO John Lyon – and Berkshire Hathaway Specialty Insurance.

New Zealand brokers are also increasingly placing commercial risks directly with offshore providers such as Lloyd’s.

In the personal lines space, it says Youi has entered the market and insurers mainly known for their commercial portfolios have expanded into personal lines.

Buyers of white-label insurance, typically large banks, have also increased pressure for lower prices and product differentiation in response to challenges from online suppliers and easily available direct insurance.

Suncorp’s $NZ1.30 ($1.20) per share bid for Tower has topped an offer from Canada’s Fairfax Financial Holdings.