Reliance Group, Unit File for Chapter 11

Reliance Group Holdings Inc. filed for bankruptcy protection. The New York insurer listed $12.59 billion in assets and $12.87 billion in debts in a Chapter 11 petition filed in U.S. Bankruptcy Court in New York City. The company’s Reliance Financial Services Corp. unit also sought bankruptcy protection.

Reliance Insurance Co., the main operating unit of the company, was taken over May 29 by Pennsylvania insurance regulators under a state judge’s order.

The company said in a statement that it reached agreement with a majority of Reliance Financial’s lenders and Reliance Group’s bondholders “on the major economic terms of a plan of reorganization.”

Reliance needs a bankruptcy judge’s approval for its proposed reorganization and also is discussing with the Pennsylvania Insurance Department the terms of its agreement with creditors.

The company faltered in the late 1990s because of higher-than-expected workers’ compensation costs and other claims. Also, a string of natural disasters, environmental claims and asbestos liabilities led to underwriting losses.

Reliance, which traded as high as $19.81 in July 1998, fell .004 cent to 1.3 cents in over-the-counter trading.