Insurance giant American International Group is looking for a bridging loan of $40 billion (£22 billion) from the US Federal Reserve as it tries to sell assets to rebuild its balance sheet.

It is believed to have turned down private-equity investment to retain control over its business.

Chief executive Robert Willumstad has presided over three quarterly losses totalling $18.5 billion. The company's share price has fallen nearly 80% this year.

The company is struggling to cushion itself against future writedowns from credit-default swaps — contracts AIG sold to protect fixed-income investors.

A string of reports said that AIG was seeking the Fed funds as a temporary measure, and planned to repay the loan with the proceeds from asset sales.

A solution to the crisis became more imperative at the weekend after rating agency Standard & Poor's said it may downgrade AIG. That could force AIG to post up to $14.5 billion more in securities for its debts.

AIG is said to be working on a plan that involves asset sales and shifting regulated capital from the insurance operations to the holding company.

An AIG spokesman earlier confirmed the company was evaluating a wide range of options, including asset sales.

AIG has been negotiating with various parties including the New York Insurance Department and private equity firms including Kohlberg Kravis Roberts and JC Flowers to try to find ways to raise new capital and protect policyholders.

Former AIG chief executive Maurice “Hank” Greenberg, who ran the company for nearly four decades, was not involved in any of the discussions, said his spokesman, Glen Rochkind.

On Greenberg's watch, AIG grew into one of the world's largest insurers. Greenberg stepped down in 2005 in the middle of an accounting scandal and his successor, Martin Sullivan, was replaced by Robert Willumstad in June after investors grew disgruntled over its three quarters of losses.