Owned by Britain's Cinven, Eurovita has become the first insurance company in Italy to be placed under temporary administration after its private equity owner refused to pump more money into it.

Cinven has later agreed to a 100 million euro ($109 million) capital injection but Eurovita needs a total of at least 400 million euros, sources have said.

Eurovita grew rapidly under Cinven selling its products through over at four dozens distributors and with a high share of wealthy individuals among its customers. It ran into trouble when rising interest rates prompted clients to redeem their policies to reinvest the money.

Under the rescue deal, rival insurers would inject the capital in Eurovita, while banks would provide lending, one of the people said.

The banks could also provide capital depending on the final form of the rescue, the source added.

The deal must be reached quickly to meet Italian insurance regulator IVASS' demands that Eurovita, among top 20 Italian life insurers, urgently acts to boost its solvency ratio, a key measure of financial strength for insurers.

Eurovita said in its 2021 financial report its solvency ratio had fallen below a "soft limit" tolerance threshold set at 150%, adding it was taking steps to bring it back above that level.

As talks continue under the direction of the Treasury and the regulator, the government is set to announce by March 31 that Eurovita will remain under temporary administration for 12 more months, while also extending a halt to the early redemption of its investment products.

The regulator this year put Eurovita under temporary administration after Cinven's efforts to sell Eurovita to a rival private equity firm collapsed over the lack of a re-insurer ready to take part in the deal.

Italian financial authorities, which appointed commissioner Alessandro Santoliquido to run Eurovita, are keen to avoid its liquidation out of concern it may harm the perception of life insurance products as low-risk investments.

Authorities believe Eurovita is an isolated case, one of the sources said, as other Italian insurers and banks have a more balanced distribution of assets and are less exposed to redemptions.

($1 = 0.9187 euros)

(Additional reporting by Giulio Piovaccari; Editing by Tomasz Janowski)

By Giuseppe Fonte and Valentina Za