NEW YORK (Bloomberg) — Ritchie Capital Management Ltd. is seeking bankruptcy protection for two Dublin-based funds after they lost more than $700 million on life insurance investments.The hedge-fund manager asked the US Bankruptcy Court in Manhattan to approve a $17 million interim loan from ABN Amro Holding NV as part of $30 million in financing for the funds. They owed ABN Amro $436.5 million as of April 30, Lisle, Illinois-based Ritchie said in court filings on Wednesday.

The bankruptcies follow a May 2 lawsuit in which Ritchie accused Coventry First LLC, its partner in the insurance investments, of concealing a government investigation into fraud against policyholders. The firms jointly bought life-settlement plans — bets that insurance payouts will exceed the premiums.

“Bankruptcy procedures that permit the sale of assets free and clear of any encumbrance would give a maximum value to the policies,” Jeff Marwil, a lawyer with Winston & Strawn who represents investors in some of Ritchie’s onshore and offshore funds, said today in an interview.

Ritchie, founded in 1997 by former college football linebacker Thane Ritchie, 41, has been selling assets to pay off clients following two years of subpar returns. It agreed in April to sell a “significant portion” of its multi-strategy fund’s holdings to New York-based Reservoir Capital Group in a transaction valued at $1 billion. It’s been in talks to sell additional assets to potential buyers including Coller Capital Ltd., a London-based private-equity firm.

The Chapter 11 filings cover Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. II. They listed debt of $811 million and an unspecified amount of assets.

The funds were formed in 2005 to invest in life- settlements, where wealthy individuals over age 65 sell their policies for less than the death benefit and more than the cash- surrender value. The buyer continues to pay the premiums, betting that the named-beneficiary of the policy will die soon enough to make a profit.

The Ritchie companies bought policies from Coventry and its affiliate LST I LLC, intending to profit either from a securitization or from collecting death benefits.

Ritchie said it was sold “non-conforming” policies by Coventry and its affiliate LST I LLC, which prevented them from being securitized. That led to a “precipitous decline” in the funds’ assets that Ritchie said eventually led to its bankruptcy filing.

Coventry, based in Philadelphia, last month called Ritchie’s lawsuit a “cheap publicity stunt” to divert attention from Ritchie’s own financial problems.

Ritchie affiliates are the largest unsecured creditors. They are owed $290 million, according to court papers.

The firm said it needs new cash “urgently” to pay servicing fees on its life-settlement policies and other operating expenses.

As of the bankruptcy filings, Ritchie I owned 849 policies with an aggregate death benefit of $2.3 billion, and Ritchie II owned 182 policies worth $419.5 million.