Reliance Group Holdings Inc. went to court to file for Chapter 11 bankruptcy protection on June 12. According to the Wall Street Journal, the filing in the Southern District of New York’s U.S. Bankruptcy Court listed assets of $12.59 billion and liabilities of $12.87 billion as of Sept. 30. The New York-based property/casualty insurance provider announced that it had agreed on a company restructuring with a majority of its bank-debt holders and bondholders.
According to the Philadelphia Inquirer, Reliance’s request for credit relief came in the midst of a battle between Pennsylvania regulators and Reliance management for control over nearly $100 million, and possibly more, in Reliance assets. In a complaint filed in Commonwealth Court on June 11, the state contended that Reliance Group wrongly took or withheld that money from federal tax funds and refunds belonging to subsidiary Reliance Insurance Co. of Philadelphia. The company reportedly denies the accusation.
The Pennsylvania Insurance Department took control of Reliance Insurance on May 29, eight months after Reliance stopped filing financial statements as workers’ comp and environmental claims piled up.
According to the Inquirer, the more money Pennsylvania can collect from Reliance Group, the more it hopes to reduce the chance of having to declare Reliance Insurance insolvent. An insolvency would force other insurers to pay Reliance’s unfunded claims, which could reportedly reach a record $2 billion.
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