NEW YORK (Bloomberg) - American International Group Inc. (AIG), the insurer bailed out by the US, was challenged by regulators about an "apparent inconsistency" in its description of derivative contracts with European banks.

The Securities and Exchange Commission (SEC) wrote to AIG on December 19 asking the company to justify statements it made about the contracts in a regulatory filing the month before. AIG released a filing months later saying the risk of losses on the derivatives may last "longer than anticipated". The correspondence was posted on the SEC's website.

SEC letters to three AIG CEO, dating back to at least April of 2008, signal that the regulator was concerned the New York-based company was not disclosing enough to investors. The December letter asked about contracts that allow European banks to lower their reserves, and AIG's statement that most of the trades would be terminated within 18 months.

"You indicate that these contracts provide credit protection but not risk mitigation to the counterparties," the SEC said. "Please explain this apparent inconsistency."

After AIG provided more information to investors on June 29, the SEC said in a July 1 letter to the insurer that the review of filings was complete and that regulators "have no further comments at this time."

Such correspondence may be released 45 days after a review is closed. The letters released by the SEC also include requests for AIG to improve disclosure about retention bonuses, corporate loans and the departure of Edmund Tse as leader of the non-US life insurance business.

John Heine, a spokesman for the SEC, declined to comment on the documents. Christina Pretto, a spokeswoman for the insurer, did not immediately return a call seeking comment.