American International Group Inc. is winding up Richmond Insurance Company Limited, a Bermuda reinsurer that became the focus of US regulators probing undisclosed ties between AIG and several offshore entities.

George Cubbon, head of AIG's Bermuda operations, said Richmond recently surrendered its insurance license to the Bermuda Monetary Authority. This effectively put it out of business.

"We are looking at exploring ways of running off the company's business, or disposing of the entities," Mr. Cubbon told The Royal Gazette.

He said Richmond is no longer selling reinsurance policies in Bermuda, but is still based at AIG's Hamilton office.

When an insurer goes into 'run off' it generally continues operations on a smaller scale until all policies sold expire.

Mr. Cubbon said it was possible that Richmond, which has subsidiaries in Barbados and Gibraltar, may go to a buyer either as a whole, or in part.

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

There were also questions over whether AIG effectively controlled the reinsurer and should consolidate it into its financial statements.

New York Attorney General Eliot Spitzer, who has led investigations into US insurers, in May said AIG "repeatedly misled regulators about the nature of its relationship" with Richmond and other offshore entities.

These comments were made in a civil suit filed against AIG and its former chief executive Maurice (Hank) Greenberg and former chief financial officer Howard Smith.

AIG had to increase its 19.9 percent shareholding in the Bermuda company to 69.9 percent last month, paying $12.2 million to Germany's Munich Re, the world's largest reinsurer.

Munich Re spokeswoman Anke Rosumek said the company had a put option that gave it the right to sell its shares in Richmond to AIG at the price it originally paid several years ago when it bought into the Bermuda reinsurer.

Mr. Spitzer met with Munich Re officials in April about deals involving Richmond Insurance.

AIG spokesman Chris Winans confirmed AIG is now Richmond's majority stakeholder, and will be added to AIG's list of affiliate and subsidiary companies. The consolidation of Richmond had virtually no effect on net income or consolidated shareholders' equity, the company said in a regulatory filing.

At present, Richmond has a total of five shareholders; AIG with its 69.9 percent stake and four other minority shareholders who each hold between one and ten percent.