University of California regents sue AIG over subprime mortgages

Five years later, the mega insurer is still haunted by bad loans

The Regents of the University of California are reportedly suing American International Group, or AIG (AIG), on the grounds that the insurer allegedly hid exposures to subprime mortgages.

The Insurance Journal reported on the lawsuit this week. The publication says the university system ended up taking a hit on investments in mortgage securities backed by subprime loans.

Starting in 2005, AIG increased its writing of credit default swap contracts, concentrating on U.S. residential mortgage loans including some classified as subprime, according to the complaint.

At about the same time, its AIG Financial Products unit stopped insuring some credit default obligations, citing declining subprime loan underwriting standards.

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