WA-based RAC says it is aligned with IAG on the decision to submit a new application seeking regulatory approval for the sale of its underwriting business.

RAC says its bid to partner with IAG reflects rising regulatory requirements, catastrophe risks and the greater capabilities a national insurer can bring.

The group currently insures almost $270 billion of home and motor risk, mostly concentrated in Perth, according to its website.

“This creates geographic concentration risk, meaning a single major event would affect a large proportion of our members at the same time,” it says.

A national insurer such as IAG can spread risk across the country and has the size to invest significantly more in technology, strengthening systems, claims capability and resilience.

“While RAC has continually fine-tuned and improved our insurance business, we believe the environment has now shifted to a point where partnering is in the best interest of our members and our people,” it says.

In December, the Australian Competition and Consumer Commission opposed the $1.35 billion acquisition under previous regulatory arrangements, meaning IAG had to reapply under the new regime that started in January to continue pushing its case.

The ACCC has asked for responses to a questionnaire by Thursday and expects to complete an initial assessment by April 17.

Issues flagged may trigger a second-phase review that could take up to 90 business days, while businesses can lodge a public benefit application if they think some factors outweigh likely detriments such as reduced competition.

Parties dissatisfied with the outcome can seek a review by the Australian Competition Tribunal.

The proposed deal includes IAG’s acquisition of RAC underwriting and a 20-year distribution and brand licensing agreement.

“The partnership will preserve the much-loved, local RAC brand and WA-based services,” IAG CEO Nick Hawkins said at the half-year results last month.