Suit Traces Roots of Insurance Scandal

"Many brokers would ask for such a thing all the time,'' he said. "I think I can say all, all of these brokers are primarily brokers who do business with AIG in the area of management liability to D&O and E&O (executives and officers). There was no point in us putting in place incentive agreements in other lines of insurance where we didn't face that problem.''

In fact, by August 2003, a full year before the insurance scandal broke, AIG had stopped paying incentive bonuses to brokers for selling D&O policies. Gold testified that the insurer no longer needed to make the payments because several competitors were no longer in business. AIG was no longer in danger of losing market in the D&O market, especially after the bursting of the dot-com bubble.

"Many of those companies had gone out of business along with many of the insurance companies that were providing D&O insurance,'' Gold said. "I think what you see now is that there's much more of a demand for an insurance company that is financially stable and has no questions about is solvency is capable of defending directors and officers when they get sued. And I think AIG has been and is the dominant company that meets all of those requirements."