AIG, the world's biggest insurer, revealed yesterday it had received subpoenas from US authorities related to policies that may be used by companies to smooth earnings.

Mr Eliot Spitzer, New York State attorney-general, and the Securities and Exchange Commission sent them to AIG last Wednesday on the same day it announced quarterly earnings.

While speaking on a call with analysts on that day, Mr Hank Greenberg, AIG's chairman and chief executive, lashed out at US regulators and accused them of turning "foot-faults into murder charges" when investigating companies. Such a heavy-handed approach could be a drag on the US economy if it continued, he said.

A spokesman yesterday declined to comment on the subpoenas beyond a statement which said they were linked to "investigations of non-traditional insurance products and certain assumed reinsurance transactions and AIG's accounting for such transactions".

AIG is one of several insurers to get caught up in a widening investigation into the alleged misuse of insurance products to manipulate company earnings. Berkshire Hathaway, the US conglomerate run by Mr Warren Buffett, has also been subpoenaed.

The investigation into the misuse of so-called finite reinsurance was launched last year after regulators began scrutinising insurance products AIG sold to Brightpoint, a small telecommunications company in Indiana, which were allegedly used to perpetrate accounting fraud.

The products are often tailor-made to fit specific circumstances, but regulators are only interested in cases where there is not a clear transfer of risk from the company purchasing the product to the insurance provider.

AIG has agreed to allow an outside consultant to examine its books as part of a $126 million settlement of issues arising from its transactions with Brightpoint and others.

Also, AIG has said it would form a special committee to ensure no products sold to companies are used to misrepresent income statements or balance sheet.

Finite reinsurance, also called non-traditional or loss-mitigation insurance, is typically purchased by companies and insurers looking for protection against the financial effect of future liabilities.

Regulators are considering whether companies should be permitted to account for these contracts as insurance and not as debt. - (Financial Times Service)