AIG Deconstructed: AIG Rules Iraq

Mine field. Battle zone. DMZ. These are but a few of the colorful terms that have been used to describe the horror that is the American International Group(AIG Quote) -- and its army of shell-shocked stockholders and policyholders.

But little did we know how accurate those war-zone metaphors truly were.

Were you were aware, for example, that the behemoth insurer currently handles more than 80% of insurance claims from contractors working in the battlefield through its subsidiary AIG Iraq?

Consider that this means that the great majority of civil workers who are injured in Iraq and Afghanistan are reliant on AIG for their new prosthetic leg or psychological counseling.

Now consider that sentence again.

The most recent discovery in our ongoing series dissecting the Waterloo that is AIG, it is another of the many reasons why AIG received the $180 billion bailout that it won from the government -- and why untangling its assets during the company's ongoing effort pay back that bailout has proven so problematic.

And, of course, even in the Middle East, AIG comes with baggage.

Case in point: Federal law requires all federal contractors working overseas to obtain worker's compensation insurance known as Defense Base Act insurance (DBA). For 90% of the DBA insurance required in Iraq and Afghanistan, the premiums and other terms are negotiated between the private contractors and the insurance companies. But taxpayers ultimately pay the final cost, because premiums are built into companies' contracts with the government.

AIG practically holds a monopoly over these types of claims. In 2007, the company processed nearly nine of every 10 injured-civilian claims filed in the war zone.