Insurance Australia Group (IAG) has received the competition watchdog’s approval for its $1.85 billion purchase of Wesfarmers’ insurance underwriting operations.

The Australian Competition and Consumer Commission (ACCC) has concluded the deal would not substantially weaken competition in the insurance market.

“Therefore, the ACCC has decided not to oppose the proposed acquisition,” ACCC chairman Rod Sims said on Wednesday.

IAG’s acquisition comprises Wesfarmers’ underwriting companies trading under the WFI and Lumley Insurance brands, and a 10-year distribution agreement with Coles.

The purchase still requires approval from Treasurer Joe Hockey, the Australian Prudential Regulation Authority and several New Zealand regulators.