American International Group Inc. on Tuesday said Norfolk Reinsurance Company Ltd., a subsidiary of a Bermuda unit that drew scrutiny from US regulators, has been sold.

AIG spokesman Chris Winans confirmed that Norfolk, a unit under Richmond Insurance Co. Ltd., was sold in July.

He declined to name the buyer or disclose what AIG, through Richmond, was paid for the business.

Richmond is a Bermuda reinsurer, set up in 1986, that AIG admitted to using improperly.

Head of AIG?s Bermuda operations George Cubbon, in a July interview, said Richmond Insurance Co. Ltd. surrendered its license to Bermuda?s financial services regulator, the Bermuda Monetary Authority.

?We are looking at exploring ways of running off the company?s business, or disposing of the entities,? Mr. Cubbon said.

When an insurer goes into ?run off? it sells no more policies, and generally continues operations on a smaller scale until all sold policies expire.

Mr. Winans said he could not comment on which of Richmond?s other units would be sold, or put into run off.

Under Richmond was Norfolk in Bermuda; an Irish subsidiary, Richmond Re (Ireland); a Gibraltar unit, Euroguard, and in Barbados, Richmond Insurance (Barbados).

AIG ran into trouble with regulators over its business with Richmond because ties between the two companies were not properly disclosed.

Richmond and Norfolk each held licenses to sell insurance in Bermuda, while only the latter sold policies. Norfolk was set up in 1999 as a rent-a-captive, a specialised type of captive company designed for corporations that want the benefits of a captive, a self-insurance vehicle, but without the commitment and expense.

Under a rent-a-captive structure, the insured gets to ?rent? space in the company, forming, in effect, a mini-captive. It is common for the structure to be designed as a segregated cell which legally separates each ?mini-captive? from the liabilities of any other cells.

Like Norfolk, Euroguard is a rent-a-captive structure.

Norfolk sold finite risk type transactions to a French subsidiary of AIG, Banque AIG, company records show.

A US investigation of the insurance industry has focused on finite risk transactions, a nontraditional form of reinsurance that can be used to mask losses. New York Attorney General Eliot Spitzer, who has led investigations into US insurers, said AIG ?repeatedly misled regulators about the nature of its relationship? with Richmond and other offshore entities.

Mr. Spitzer made the comment in a May civil suit filed against AIG and its former chief executive Maurice (Hank) Greenberg and former chief financial officer Howard Smith.

AIG claimed in a 2000 letter to New York regulators that it did not control Richmond, a company it then had a 19.9 percent stake in. AIG had to increase its stake in Richmond from 19.9 percent to 69.9 percent in June when the company?s largest shareholder, Germany?s Munich Re, exercised a put option to sell its shares to AIG for $12.2 million.

Richmond and Norfolk each shared offices with AIG?s Bermuda operations, and the chairman of AIG?s Bermuda operations, Joseph Johnson, is Richmond?s president while Ralph Rathjen, another Bermuda AIG executive, is executive vice-president and actuary.

AIG, in May, said it would consolidate Richmond into its financial statements, as part of an earnings restatement that dated back five years and reduced income by $3.9 billion. The consolidation of Richmond had virtually no effect on income or consolidated shareholders? equity, the company said in a regulatory filing. Besides AIG, Richmond has four minority shareholders; three with a ten percent stake ? The Richmond Partnership, Heddington Insurance and Robert C. Golden ? while Transition Holdings Ltd. owns one percent.