AIG could face a multi-million pound directors' and officers' (D&O) pay-out if Parmalat's administrators successfully sue Bank of America for $10bn (£5.6m) in damages.

Administrators of the failed Italian dairy company are suing Bank of America alleging the bank assisted Parmalat senior managers in structuring transactions that concealed Parmalat's insolvency.

Sources said that AIG provided D&O cover for Bank of America.

Bank of America has vowed to fight the allegations.

An AIG spokesman declined to comment.