Insurance Australia Group (IAG) has announced the purchase of The Royal Automobile Club of Western Australia’s (RAC’s) underwriting business, a deal worth $1.35 billion. In a media release this morning, the giant insurer said the transaction was a “strategic alliance” that includes a 20-year distribution agreement for branded home and motor insurance products.

RACQ said there will be “no immediate changes” to the insurance policies of its 1.3 million members.

"Our alliance with RAC will draw on our proven track record with successful motoring club partnerships and help us keep more Western Australians safe through competitive, accessible and high-value insurance products and services,” said Nick Hawkins (main picture), IAG’s CEO.

RAC’s release said the motoring club and mutual will continue to distribute general insurance products under the RAC Insurance brand through existing channels, “while IAG will take on underwriting, claims management, product development and pricing.”

“Importantly, a significant claims presence will be maintained in Western Australia – this includes claims handling capability,” said the release.

RAC said the decision to sell was a result of an “an increasingly complex regulatory environment, higher claims volumes and expenses, and rising reinsurance costs, along with a requirement to hold larger capital reserves for claims and natural disasters.”

“IAG brings national scale, global reinsurance capability and industry-leading technology to support RAC members, along with a deep understanding of member focused organisations,” said Rob Slocombe, RAC Group CEO.

IAG’s release said, subject to regulatory approvals, the transaction is expected to complete in the first half of 2026.

In November, IAG bought a 90% stake in the Royal Automobile Club of Queensland Limited (RACQ) for $855 million.