Insurance Australia Group has been cleared by the Commerce Commission to acquire the "good" assets of New Zealand rival AMI Insurance.

The deal comes after AMI was forced to seek a financial rescue from the Government because the Christchurch earthquakes drained its reserves. The terms of the bailout will see AMI's earthquake liabilities transferred to a Crown-owned company, leaving IAG free to pick up the good assets.

The commission is satisfied that the proposed acquisition will not be likely to substantially lessen competition in the national markets for insurance, chairman Mark Berry said.

IAG offered $380 million for AMI's good assets. The Australian insurer's local brands include State and NZI. The tie-up will lift IAG's market share to about 40 per cent. IAG's shares closed down on the ASX at A$3.17 yesterday.