IAG will buy the insurance business of the Royal Automobile Club of Queensland and struck a 25-year distribution deal to sell products to its 1.7 million members.

Insurance giant IAG has agreed to buy 90% of Royal Automobile Club of Queensland's (RACQ's) existing insurance underwriting business for $855 million, as part of a long term strategic alliance.

Sydney-based IAG, the insurance giant behind NRMA, has announced a $1 billion deal to buy the insurance arm of RACQ.

Insurance Australia Group will acquire 90 per cent of shares in Queensland insurer RACQ’s underwriting business in a 25-year “long-term alliance”.