Mumbai: The Insurance Regulatory and Development Authority (IRDA), India's insurance regulator has asked the two insurance joint ventures companies between the Tata Group and American International Group (AIG) to submit reports on their operational status.

The request for more information on operational status was made by the chairman of the IRDA, J Hari Narayan, asking the companies for ''business status reports''. He said that the companies were expected to respond ''quickly''.

The demand comes after the global insurer, AIG, was reported to be close to bankruptcy, following investment bank Lehman Brothers who filed for Chapter 11 bankruptcy yesterday (See: Lehman Brothers heads for Chapter 11 as Barclays walks away).

AIG stock prices crashed 61 per cent, and the company was desperately seeking funding to stay afloat. Facing a severe cash crunch, the insurer is looking to raise $14.5 billion to cover obligations, and reports indicate that it has around only a day to do so, before it will be left with no option but a bankruptcy-court filing.

AIG has joint ventures with India's Tata Group for both life and general insurance businesses. Both are run as independent joint venture companies, in the name of Tata AIG Life Insurance Co. Ltd. and Tata AIG General Insurance Co. Ltd. The boards of both companies are likely to meet during the day to discuss responses to the query by IRDA, according to reports citing unnamed sources in the company.

In a statement to DowJones Newswires, IRDA chief Narayan said that the current solvency ratios of both joint venture companies looked ''comfortable'', and that the regulator was not concerned over capital.

Last week, AIG had announced that it was selling assets to raise liquidity, which elicited a strong response from the officials of the India joint venture that India was not part of the sell-off, as it had the highest potential for the life business. However, since the newer insurance setups need periodic capital investments for business expansions, the primary concern now is that AIG as the joint venture partner, given its own financial troubles, may no longer be in a position to contribute to the joint venture companies.

Solvency ratio is mandated at a minimum of 1.5 per cent for insurance companies in India. It is proxy for the long-term debt payment capacity of a company.

Indian customers of AIG, who are basically customers of the Tata joint venture companies, are likely to be insulated from the impact, since the Tata group is the majority stake holder in both companies, holding around 74 per cent.

Reports suggest that there is a remote possibility at this time of the Tata Group being asked to disassociate itself from AIG, in the event that capital infusions from the foreign partner are no longer forthcoming, and in turn, adversely affect solvency margins.

Even then, sources say, the Tata Group's financial muscle is more than adequate to buy out AIG's stake in the joint venture, so the impact on the Indian business may be minimal, and customers would not be impacted.

See: AIG in free fall after credit rating downgrades