Aviva’s ambitious £3.7 billion ($4.92 billion) bid to acquire Direct Line and become the UK’s top home and motor insurer has hit a potential hurdle, as the country’s competition authority launched a formal inquiry into the deal on Wednesday.

The Competition and Markets Authority (CMA) announced it will assess whether the proposed merger could significantly diminish competition within the insurance sector. The agency has opened the floor to public and industry input, with a deadline for submissions set for May 29.

Despite Aviva’s strong stock performance—up 22% this year and reaching a 12-month peak on May 12—shares remained flat following news of the probe.

The proposed acquisition, agreed upon in December, would create one of the largest publicly traded insurance entities in London. The merger positions Aviva to better compete with major players like Legal & General and Prudential, while reinforcing its strategy to concentrate operations in core markets: the UK, Canada, and Ireland.

According to analysts at JP Morgan, the combined entity would control over 20% of the UK’s home and auto insurance markets. However, at the time of the deal’s announcement, analysts had anticipated minimal regulatory friction.

If successful, the acquisition would mark a milestone for CEO Amanda Blanc, representing her most significant strategic move since taking the helm. The CMA is expected to issue its Phase 1 decision by July 10.

Aviva, which is scheduled to release its Q1 results on Thursday, has not commented on the CMA’s announcement. In February, the insurer reported stronger-than-expected annual earnings, buoyed by robust growth in general insurance premiums. The company has maintained that the Direct Line deal remains on course for completion by mid-2025.