NEW YORK (Reuters) - American International Group Inc sees China becoming a much larger part of its general insurance business within the next five years, Nicholas Walsh, executive vice-president of the foreign general insurance division, said yesterday.

Walsh, a 35-year veteran of the giant insurance company, said he expects a rapid ramp-up of AIG's business in the world's most populous country once some key regulatory approvals are in hand, in the next year or so.

"Just by following the Chinese economy, I think there is enormous opportunity for anyone who has products to sell," said Walsh, speaking to investors at an insurance conference held by investment firm Keefe, Bruyette & Woods in New York.

"Once we are established, there is a relative degree of opportunity there, but it has just been that process of applying and receiving approval," he added. "China will be a much bigger component towards the end of a five-year period." AIG, founded in Shanghai 89 years ago, already does a bustling business in life insurance there. Among the biggest areas of opportunity for the foreign general unit in China, Walsh listed accident and health coverage, export liability and marine insurance.

He was more cautious about prospects in the property market there, however.

"Trying to compete face to face with the big domestic companies on property is not something we are focusing on right now," said Walsh. "The local companies have very large capacity, and are writing business at prices that we don't yet understand." Insurers are often wary to sell policies when they cannot adequately quantify the chance of losses.

During 2007, the foreign general insurance group, which is made up of AIG's general insurance business outside the US and Canada, accounted for roughly a third of AIG's total general insurance policy sales. The unit employs about 19,500, Walsh said.

AIG also sees strong growth opportunities in other emerging insurance markets, including Africa and the Middle East, said Walsh. The company has recently established a Takaful (a type of insurance in accordance with Islamic custom) in Bahrain.

"We are looking to branch that throughout the Middle East," said Walsh. "We are well advanced in our thinking as far as that is concerned." A "Takaful" is an Islamic insurance concept that differs from traditional coverage in that it has no policyholders, only contributors, who jointly participate in the insurance- like fund, managed by the Takaful company.

Walsh said, as in China, his unit intends to work closely with AIG's life insurance operations as it expands in the Middle East.

AIG, hit by record losses over the past three quarters from guarantees it wrote on toxic mortgage-backed derivatives, has seen its shares fall by more than 60 percent since the beginning of the year.