AIG has put the business that caused billions of dollars of crisis-era losses into Chapter 11 bankruptcy protection, in an effort to limit the potential for former executives to claim bonuses.
In a filing on Wednesday, the US insurer said it had put AIG Financial Products into bankruptcy. The unit’s risky bets on credit default swaps were at the heart of the US government’s $182bn bailout of AIG in 2008 during the financial crisis.
Since then, AIG has been battling a group of former AIG FP executives in the US and UK, who claim they are owed millions of dollars in bonuses by the business.
In its filing, AIG said that the proposed reorganisation of AIG FP would limit any amount the 46 executives could claim to under $1mn.
“The terms of the deferred compensation plans provide that upon a bankruptcy filing by FP, any financial obligation of FP under the deferred compensation plans is subordinate to all other liabilities of FP,” the company said. “Pursuant to the terms of the Plan of Reorganization, the only funds available to the 46 former FP executives to extinguish their claims would be an equal share in a limited pool of $1mn.”