Complaint alleges mismanagement at world’s largest insurer.

The City of New Orleans Retirements Systems has sued AIG, accusing it of mismanagement, according to reports.

The complaint alleges that the troubled insurer’s senior management and directors failed to properly monitor the risk of losses caused by the US subprime crisis.

It said: “In spite of AIG’s abysmal corporate governance record and myriad red flags concerning the subprime crisis, the individual defendants knew or recklessly disregarded risks the company faced.”

AIG was on the brink of collapse last week because of losses related to subprime, and a subsequent massive drop in its share price. The US government stepped in with a $85bn rescue package.

AIG could not be contacted for comment.