The Commerce Commission will issue its final decision on IAG's proposed $380 million purchase of AMI by the end of February.
As part of the proposed deal, IAG will take over AMI's 500,000 customers, but it does not want $1.8 billion worth of claims relating to the Canterbury earthquakes, so the Crown is taking ownership of them.
The Commerce Commission is one of three regulatory bodies which need to approve the deal, and it needs to decide whether the purchase will substantially lessen competition in the insurance market.
In a preliminary issues paper published on Wednesday, the commission says IAG has agreed to an extension, and the regulator's final decision will be released before 29 February.
The commission says the timeframe could change again.
The Reserve Bank and the Overseas Investment Office also need to approve the sale.