AIG’s board on Sunday approved a radical plan to give the government a controlling stake in two of the stricken insurer’s largest divisions in exchange for a new $30bn-plus lifeline from the US authorities.

Under the deal, the third government rescue of AIG since September, the US Treasury and the Federal Reserve will provide around $30bn in fresh capital to the insurer, lower the interest rate on a $60bn-loan and ease the terms of a $40bn preferred share investment. People close to the situation said the $30bn would not be injected immediately but would be provided as a standby line of equity that AIG could tap as its losses mount.