Talks between financial firms and officials aimed at helping the struggling insurer are taking place.

"We're in the moment right now as to whether or not they can put something together," Mr Paterson said.

Tough climate

On Monday, the insurer was thrown a $20bn (£11.2bn) lifeline from New York state authorities.

But analysts said it may need further capital for its business to survive:

"While there is a chance the company can work its way through its liquidity problems if it can secure substantial bridge financing, we think this will be challenging to execute it in the current onerous credit environment," said Thomas Gallagher, an analyst at Credit Suisse.

AIG is under pressure to raise money after posting three quarterly losses in a row totalling $18.5bn (£10.3bn).

Talks between AIG, financial services and officials firms will continue on Tuesday, a spokesperson for the New York Federal Reserve said.

Nervous customers

About 100 worried customers of an AIG subsidiary, American International Assurance (AIA), queued outside its Singapore office to check the status of their policies.

Tan Peng Hock, 60, said he did not mind surrendering a policy worth about $42,000 despite possible losses.

"I prefer to hold cash for the time being. It's better to be safe than sorry," Mr Tan told the Reuters news agency.

Singapore's central bank tried to reassure investors. It said that AIA "had sufficient assets in its insurance funds to meet liabilities to policy holders".

Ratings agencies Moody's and Standard & Poor's downgraded credit ratings on AIG debt on Monday.

Wide influence

AIG is much more than an insurance company. It also has a financial products division that is at the heart of many of the firm's current problems.

"Its tentacles reach into every part of the economy," Matthew Bishop of the Economist told the BBC.

He said the consequences of the firm's collapse would be devastating for the financial system.

"It's worse than insurance policies not being valid. They are writing derivative contracts and these have the potential to leave a lot of other banks holding massive losses that they will have to deal with."

Many of AIG's problems are thought to stem from credit default swaps, which insure against companies going bust.

Sir Howard Davies, former chairman of the Financial Services Authority in the UK and a board member of Morgan Stanley, said that the US would be reluctant to let AIG collapse.

"AIG is absolutely enormous. It would create knock-on consequences in insurance markets," he said.

"It is huge in China for example. That would export the American financial crisis there so it would have all kinds of political consequences."

In the UK, AIG is best known as the sponsor of Manchester United.