New York Insurance Chief explains what went wrong with AIG

Testimony by New York Insurance Superintendent Eric Dinallo to the United States Senate Committee on Banking, Housing and Urban Affairs Hearing on "American International Group: Examining What Went Wrong, Government Intervention, and Implications for Future regulation" :

"...The crisis for AIG did not come from its state regulated insurance companies. The primary source of the problem was AIG Financial Products, which had written credit default swaps, derivatives and futures with a notional amount of about $2.7 trillion, including about $440 billion of credit default swaps. For context, that is equal to the gross national product of France. Losses on certain credit default swaps and collateral calls by global banks, broker dealers and hedge funds that are counterparties to these credit default swaps are the main source of AIG's problems.

Faced with ratings downgrades, AIG Financial Products and AIG holding company faced tens of billions of dollars of demands for cash collateral on the credit default swaps written by Financial Products and guaranteed by the holding company..."

Insurance Journal: New York Insurance Chief explains what went wrong with AIG