American International Group is to replace Martin Sullivan, its embattled chief executive, with Bob Willumstad, the veteran banker who is the insurer’s chairman, in an effort to end one of the worst crises in the company’s 89-year history.

People familiar with the situation said that an emergency board meeting had decided to end Mr Sullivan’s three-year tenure at the helm of AIG, which has been rocked by credit-related losses and regulatory probes.