American International Group (AIG), the world’s largest insurer, confirmed yesterday that Joe Cassano, the head of its financial products division, will retire at the end of the month after the company reported the biggest loss in its 89-year history.

Mr Cassano, 52, will relinquish his role heading the financial products group on March 31 after the division wrote off $11.1 billion (£5.5 billion) on credit default swaps, which guarantee the payment of interest and principal in the event of a default.

The writedown pushed the insurer into the red in the fourth quarter, when losses reached $5.29 billion.

UBS, the investment bank, predicted yesterday that losses linked to the turmoil in the global financial markets could reach as much as $600 billion, with banks and brokers responsible for more than half of the total writedown. The bank, which itself has reported $18.4 billion in writedowns, said in a note that banks and brokers had already written off $160 billion.

UBS said: “Our global banks team estimates total industry losses in this financial crisis should reach north of $600 million, of which listed banks and brokers should account for ‘only’ $350 billion.”

Mr Cassano co-founded the division in 1987 and helped it develop into a company with assets of more than $500 billion. He will stay on as a consultant at AIG until the end of the year, while a permanent replacement is found. He will be replaced temporarily by William Dooley, 54, a senior vice-president of the insurer’s financial services businesses.

For the full-year AIG reported a fall in profits from $14 billion to $6.2 billion. Last month, AIG admitted that writedowns on sub-prime mortgage investments would be higher than expected after PricewaterhouseCoopers, the accountancy firm, found a “material weakness” in the way the company valued its credit swaps.

Last August, AIG had contended that its exposure to the sub-prime crisis was minimal and its exposure to debt was high quality.

Mr Cassano said last year that AIG had decided in 2005 to exit the sub-prime market, when he said that the insurer’s managers were “uncomfortable in what was going on” and decided to get out of the business.

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