AIG has been insuring sub prime mortgage bonds. Lots of them. Investors looking at AIG liablilities see nothing but disaster, as trillions of dollars of insured bonds get ready to default. It won't help AIG today, but a lesson learned from this. Don't insure bonds, any kind of bonds, ever again.
The availibility of insurance allowed greedy but clueless investors to buy risky bonds and feel good about it because they were insured. Trouble is, when times get bad, ALL the insured bonds default at the same time. No insurance company is wealthy enough to make good when everything fails at once. So, the investors are left with worthless bonds, and worthless insurance. A bond so risky that it needs insurance is too risky to sell. If the insurance hadn't been available, those bonds wouldn't have been sold, which would be a good thing.
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