In another twist to the Reliance Capital insolvency resolution process, its subsidiary company Reliance General Insurance Company (RGICL) has sought an urgent Rs 600 crore capital infusion from Reliance Capital.
Sources told TNIE that Reliance General Insurance has written a letter to the Reliance Capital administrator -- Y Nageshwar Rao – seeking the Rs 600-crore capital support from the parent company -- Reliance Capital -- by 31 December 2022.
The general insurance company has said that the fund infusion is essential to preserve the business, enhance the value and take the company's solvency from 155 per cent to about 175 per cent.
The company has in the letter said that the borderline solvency ratio (minimum solvency required by an insurance company is 150 per cent of the total insurance cover offered) has become an impediment for the business growth of the company as large corporate and government clients are showing hesitancy in doing business with it.
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Reliance General Insurance believes that the capital infusion from the existing stakeholders of the company will send a strong message of support to the market, and will allow it to outperform the market growth rate.
It will also augment value creation and negate the risk of underperforming the broader markets.
According to sources, the Committee of Creditors (COC) is expected to consider and discuss the request of Reliance General Insurance for capital infusion in the meeting on 9 December 2022.
The company has told the Reliance Capital administrator that as a large format insurer it can gain significantly in the current ecosystem if it can pursue growth like most of its peer competitors, but that would require adequate capital support from Reliance Capital.