The head of this country's biggest insurer has welcomed regulatory approval for the New Zealand part of a A$1.85 billion ($2 billion) purchase although the Reserve Bank has not yet given the deal the green light.

Jackie Johnson, chief executive of IAG, welcomed the Commerce Commission's approval for her company to buy Lumley Insurance's underwriting businesses.

The purchase forms part of a wider acquisition by IAG's parent, Insurance Australia Group, of the Australian and New Zealand underwriting businesses of ASX-listed giant Wesfarmers, Lumley's parent.

"We look forward to the successful completion of this transaction," Johnson said, dismissing anti-competition fears.

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"Both Lumley and our own intermediated business, NZI, have well-established competitors in New Zealand and our view has always been that the increment to IAG's personal and commercial lines business from the transaction will not substantially lessen competition. Lumley in New Zealand has complementary strengths to our existing NZI business and I see a tremendous opportunity for us to build on these strengths to broaden our offering to our customers and partners," she said.

The commission said it was satisfied that the purchase would not have, or would not be likely to have, the effect of substantially lessening competition, for personal and commercial insurance products.

"Lumley has a small presence in personal home, contents and motor vehicle insurance," the commission said, "where three main insurance providers (IAG, Vero, Tower) will continue to operate in New Zealand in addition to a number of other companies providing general insurance products".

Chairman Mark Berry said IAG still needed to compete with other insurers on price and quality.