The fall-out from American International Group's (AIG) $85 billion bailout by the US government could open up a number of opportunities and possibilities for Bermuda's reinsurance industry.

Insurance industry expert Andrew Barile reckons several of the Island's reinsurers will be in line to snap up parts of AIG's business, including its core risk management division, after the Federal Reserve's stepped in to hand the world's biggest insurance company a two-year loan, take a 79.9 percent stake in its stock and replace the management.

But he also believes there are a lot of questions that need to be answered over who was writing the credit default swaps which caused the company the biggest losses in the first place.

Mr. Barile cited AIG's risk management division as being a "very lucrative asset" to the company accounting for a large proportion of Bermuda's captives and which would be ripe for a takeover.

"I think the question that comes up is 'When does that asset get put on the table for sale?', because right now we have unfortunately in the US a disconnect between what Ed Liddy (AIG CEO) says in interviews on TV and what the NAIC (National Association of Insurance Commissioners) commissioners are saying," he said.

"The first issue that we each have to recognise is that Henry Paulson (US Treasury Secretary) and Ed Liddy are all connected to Goldman Sachs and so Henry says the first priority is to get back the $85 billion and so that to me sets the tone of what has to be sold and obviously what has to be sold is operations that are attractive to all of AIG's competitors."

And he claims that a number of re/insurance companies and organisations will already be eyeing up the AIG's risk management operations, while Allstate will be circling over the insurer's motor insurance business.

"The first thing people will say is that Liberty Mutual would certainly love to have the risk management operation because they are already funding operations in Bermuda," he said. "I would not be surprised if they have already called to ask about that.

"We have the Allstate people looking at private passenger automobile expansion in the market."

Mr. Barile views Bermuda's re/insurers being in pole position to acquire the operations and assets which AIG decides to sell-off.

"The question that comes up for Bermuda is to see if they are going to sell AIG's life assurance company and whether Munich Re would like to own that and then you have the two major companies Ace and XL – they are in the same business that AIG is in, and then you have all the interlocking together of people like Brian Duperreault, Evan Greenberg and Hank Greenberg.

"The big thing that comes up is to make sure that whoever takes over the operation keeps the Bermuda situation on track.

"But I also think what may be a positive in Bermuda is that some of the larger Bermuda companies have the financial resources to buy the AIG operations so this could be a bonanza for Bermuda."

In particular he sees the billion-dollar start-ups which formed in the classes of 2003 and 2005 as having the perfect opportunity to invest their capital into acquiring parts of AIG and thus growing their own business and he believes it will happen sooner rather that later.

"I think it could be a positive if people start stepping up to the plate if they have the financial resources to do so," he said.

"I think it is going to happen pretty quickly because the clients of AIG are already discussing moving their business.

"It is going to pan out, I believe, and it could pan out as a positive development."

But Mr. Barile said a big question hangs over who was writing the insurance policies for the credit default swaps and whether it was happening in Bermuda.

"That right now seems to be where the losses are the largest and nobody wants to come forward to say they are the ones that were writing the policies," he said.