NEW YORK (Bloomberg) — American International Group Inc. named Peter Hancock, described by a former employer as an "architect" of the derivatives business, to oversee finance and risk, including the insurer's money-losing credit-default swap unit.

Hancock spent 20 years at a predecessor to JPMorgan Chase & Co., where he established the derivatives group and served as chief financial officer, New York-based AIG said in a statement yesterday. Hancock, who most recently was vice chairman at KeyCorp responsible for national banking, will report to AIG chief executive officer Robert Benmosche.

Hancock "is one of the people that basically developed the credit-default swaps market at JPMorgan in the mid-1990s", said Ed Grebeck, CEO of Stamford, Connecticut-based debt-consulting firm Tempus Advisors and an instructor at New York University on derivatives. "Given that he was one of the pioneers, it's probably the first good appointment that any one of these bailed-out firms has made."

Hancock, 51, joins the insurer after AIG last week named Thomas Russo, formerly of Lehman Brothers Holdings Inc., as general counsel. Benmosche said in the statement that experienced executives have "voted with their feet" in joining AIG to help the company repay loans included in AIG's $182.3 billion government bailout. More than 60 managers including vice-chairman Matthew Winter and property-casualty executive Kevin Kelley have left AIG since the rescue.

Hancock's salary is $1.5 million in cash and $2.4 million in stock, AIG said in a filing. He is eligible for $1.8 million in cash incentive pay. In 2011, his salary rises to $1.8 million in cash and $4.4 million in stock. His pay "generally conforms" to guidelines set by Kenneth Feinberg, the Obama administration's special master for executive compensation, according to a letter from Feinberg included in the filing.

Hancock also served as chairman of the risk management committee at the JPMorgan predecessor. He stepped down as CFO in 2000 and later co-founded Integrated Finance Ltd. with Robert Merton, the Nobel Prize-winning economist, and Roberto Mendoza a former vice chairman of New York-based JPMorgan.

"Mr. Hancock was one of the architects of the firm's standard-setting derivatives business and played a key role in turning Morgan's credit business into a model for the future," said Douglas Warner, the bank's chairman in 2000, in announcing Hancock's departure.