Robert Benmosche, an insurance veteran who ran MetLife and sits on the board of Credit Suisse, is expected to be named chief executive of American International Group (AIG), the insurer propped up by more than $180 billion of Government handouts.

Mr Benmosche will replace Edward Liddy, AIG's Government-appointed chairman and chief executive, in what Timothy Geithner, the US Treasury Secretary, described as "one of the most challenging jobs in the American financial system".

AIG's new chief executive will be responsible for continuing to sell billions of dollars worth of assets in order to raise money to repay the Government bailout, as well as negotiate with President Barack Obama's new pay czar over controversial retention bonuses promised to AIG executives - all within a company structure that includes a board as well as three Government' appointed trustees.

AIG declined to comment on the appointment.

The Wall Street Journal (WSJ) reported that the insurer's board had approved Mr Benmosche's appointment. It was not clear whether the Treasury, which has a stake of almost 80 per cent in AIG as a result of the bailout, had given its blessing to the new hire.

The WSJ put Mr Benmosche’s potential paypacket at between $7 million and $10 million.

AIG was bailed out by taxpayers last September after becoming one of the biggest casualties of the credit crunch. A division of the insurer called AIG Financial Products (AIG FP) sold high-risk credit default swaps on securities backed by sub-prime mortgages, losing billions of dollars when the mortgages went bad.

Henry Paulson, the then-Treasury Secretary, brought former Allstate Corporation chief executive Mr Liddy in to run AIG after the bailout. The semi-retired banker agreed to try to turnaround the insurer without being paid for his work but in March was criticised by lawmakers for allowing the payment of $165 million in retention bonuses to workers at AIG FP.

Mr Liddy later described his questioning by a Congressional committee over the bonuses probably the worst day in his life, other than the day his mother died. In May the 63-year-old announced that he would step down as soon as a replacement could be found.

Mr Benmosche has long insurance experience, having joined MetLife in 1995 and overseen its $2.5 billion float in 2000. He stepped down as chairman and chief executive of the insurer in 2006.

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