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NEW YORK, December 9, 1998 – American International Group, Inc. (AIG) has announced that AIG Risk Finance, a division of the American International Companies, has introduced B FIRST (Blended Finite Insurance and Risk Securitization Transactions), a new program that utilizes securitization and the capacity of the capital markets to bear the risk transfer elements embedded in policies that combine finite insurance and excess of loss coverage.

B FIRST enables corporations, insurance, and reinsurance companies to combine the strategic risk financing and profit sharing of finite insurance with the catastrophic loss protection and liquidity available through securitization. Under the B FIRST program, a company can obtain an insurance or reinsurance policy underwritten by an AIG member company that will provide multi-year coverage, profit sharing, and catastrophic loss protection. A portion of the risk embedded in the policy will be ceded to the capital markets through a specialized reinsurance facility that will issue an insurance-linked note or derivative to the capital markets.

Additionally, the B FIRST program can be constructed to provide the insured with liquidity by linking insurance coverage with a pre-established parametric event with a measurable statistic, such as wind speed or richter scale magnitude.

Risks appropriate for B FIRST include any insurance risk that can be modeled using historical data or simulation methodology. This includes property catastrophe risks, such as earthquake, hurricanes, and tornadoes; as well as other short-tailed or hard-to-place risks, such as, weather, mortgage insurance, residual value insurance, credit risk, and transmission and distribution of electricity and other power sources.

“There is a significant need for affordable capacity to address major natural catastrophes and other hard-to-place risks, while the capital markets see insurance-linked bonds as an attractive means to diversify their portfolios,” said Tobey Russ, President, AIG Risk Finance. “By accessing the capital markets, companies can benefit from increased availability of affordable capacity and a potential reduction in the volatility of insurance premiums. Additionally, with the B FIRST program, there is the advantage of purchasing coverage through the efficient risk financing mechanism of a finite insurance policy from a financially strong, triple-A rated organization.”

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AIG Risk Finance to Offer Program to Combine... December 9, 1998 Page 2

AIG Risk Finance designs and implements creative financing solutions for clients requiring the most advanced risk management capabilities. Drawing on the worldwide resources of AIG's insurance and financial services companies, AIG Risk Finance creates highly structured financial insurance products.

For more information on B FIRST, contact Michael S. Canter, Senior Vice President, Insurance Securitization, AIG Risk Finance, 70 Pine Street, New York, NY 10270, phone 212/770-7266.

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AIG is the leading U.S.-based international insurance organization and among the largest underwriters of commercial and industrial insurance in the United States. Its member companies write property, casualty, marine, life and financial services insurance in approximately 130 countries and jurisdictions, and are engaged in a range of financial services businesses. American International Group, Inc.'s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

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