The restructuring, described by one insider as a “controlled break-up”, could lead to the end of AIG's 90-year history as a stand-alone global insurance conglomerate. It also could provide a template for carving up other troubled financial groups – such as Citigroup – should they be brought under government control, the people involved say.

AIG, built into a global insurance powerhouse by decades of deal-making by its former chief executive Hank Greenberg, yesterday said it was working “with the Fed to evaluate potential new alternatives for addressing AIG's financial challenges”. The Fed declined to comment

Under the plan, the government would swap its current 80 per cent holding in the insurer for large stakes in three units – AIG's Asian operations, its international life insurance business and the US personal lines business. A fourth unit, comprised of AIG's other businesses and troubled assets, could also be formed.