Tom Broughton comments on AIG's crash.

Monumental events are unfolding on Wall Street and, as I write, AIG, the world’s largest insurer, is sinking to its knees. It faces multibillion-dollar losses and profit writedowns – and it needs government intervention. Washington is asking US banks to lend the firm $75bn (£42bn) and David Paterson, the governor of New York state, has given the group permission to liberate $20bn from its own balance sheet.

AIG has been hammered by the credit crunch. It sold contracts protecting others against losses tied to subprime loans and high-risk assets. Even worse, the insurer faces exposure to hurricane Ike, which has caused billions of dollars of damage. Now, inevitably, it has been downgraded by the credit agencies, which may have catastrophic consequences.

There is intense speculation across the pond that AIG will launch a fire sale of key assets. The chunks of the group that appear to be the favourites to go under the hammer include the reinsurance business, US motor book, aircraft leasing business, stake in adviser Blackstone and ascot, the UK underwriting business with a turnover of £600m. The potential suitors include some usual suspects: Warren Buffett, Munich Re and Swiss Re.

What does all this mean for AIG UK? The group has worked hard here to promote its brand through its sponsorship of Manchester United but this headline news will severely damage confidence levels. The major UK brokers are all watching closely, as they have sizeable chunks of business with the insurer. It will take a significant downgrade for panic to set in but, ultimately, brokers may be guided by their clients’ demands.

Martin Reith, chief executive of Ascot, was on his way to New York on Tuesday to find out the fate of his company. One can imagine that Alexander Baugh, managing director of AIG UK, will be awaiting similar news.

It will take months to uncover all the knock-on events of these seismic shocks around the world. And the AIG crisis may even pale into significance when we find out which of the leading insurers faces additional exposure in the wake of the Lehman Brothers collapse and the Merrill Lynch takeover. Fasten your seatbelts.