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Sept. 16 (Bloomberg) -- A collapse of American International Group Inc., the insurer seeking to raise as much as $75 billion, would have consequences for financial firms around the globe, analysts and investors said. Wall Street's top firms, and the biggest companies in Europe and Asia, have bought protection on $441 billion of fixed-income assets from AIG to guard their investments against potential bankruptcies. A failure by New York-based AIG may result in $180 billion of losses to financial institutions, RBC Capital Markets analyst Hank Calenti said in a report today.``It is certainly a big number,'' Calenti said in an interview. ``AIG is ubiquitous.''
AIG, with $1 trillion in assets, piled up net losses totaling $18.5 billion in the past three quarters on writedowns tied to the collapse of the U.S. subprime mortgage market. It insures some of the largest assets in the world, doing business in more than 100 countries.
``If AIG goes under, there could be a domino effect,'' said Andrea Cicione, a credit strategist at BNP Paribas SA in London. ``AIG is very connected to the financial system and it is very connected to the real economy.''
AIG is the largest corporate insurer in the U.S. It sells protection against some of the biggest risks, insuring planes and commercial shipping and providing coverage against terrorist attacks.
AIG Global Real Estate's portfolio includes over 53 million square feet of property in more than 50 countries, the company said on its Web site.
Lehman Brothers Holdings Inc.'s London landlord, Songbird Estates Plc, said rent payments on the bank's offices in the Canary Wharf financial district are insured by AIG. The insurer is committed to paying up to four years of rent in the event of a default, Songbird said in a statement today.
AIG is the second-largest property and casualty insurer and the seventh-largest life insurer in the U.S., according to 2007 data compiled by A.M. Best Co. The company insures high-end homes through its Private Client Group and sells auto coverage online through AIG Direct.
More than 40 percent of AIG's revenue comes from property and casualty customers. AIG provides coverage for offshore oil drilling platforms in the Gulf of Mexico, warrantees for televisions in Brazil, and insurance that complies with Islamic law in Bahrain.
AIG's insurance businesses have enough money to pay claims, said David Neustadt, a spokesman for Eric Dinallo, the New York State insurance superintendent.
``AIG's problem is not that it is short of capital, unlike some other institutions,'' Neustadt told reporters today. ``It's a liquidity problem.
``We're ensuring that the new assets that come in will protect policyholders,'' he said. ``That's our job.''
New York Governor David Paterson said Wall Street is ``stunned'' by the AIG's struggles. The executives at U.S. financial firms ``aren't totally aware'' of the scope of the crisis, he said today in a Bloomberg Radio interview.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are working with AIG to determine how much the insurer needs, said two people familiar with the matter and declined to be identified because negotiations are private.
``AIG poses a systemic risk because it's a large counterparty in the financial system,'' said Prasad Patkar, who helps manage the equivalent of $1.8 billion at Platypus Asset Management in Sydney. ``It's too big to be allowed to fail.''
Without outside help from the U.S. government or investors, AIG will be forced into bankruptcy, said Maurice ``Hank'' Greenberg, its former chairman and chief executive officer. Greenberg, who controls the largest stake in the insurer, saw his holdings decline by $3.1 billion last week.
AIG would be able to sell assets to raise the funds it needs ``given some time,'' Greenberg said on CNBC today. Allowing it to fail would create a ``systemic'' issue, he said.
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