The legal stoush between AIG and former executives Maurice “Hank” Greenberg and Howard Smith has been resolved, with all parties agreeing to a settlement.

All claims have been dropped, including a $US1 billion ($1.08 billion) derivative lawsuit AIG filed in 2007 against Mr Greenberg, the insurer’s iconic former chairman and CEO, and Mr Smith, the former CFO.

The settlement also covers any claims from and against CV Starr and Co and Starr International Inc, two former AIG affiliates that 84-year-old Mr Greenberg now controls.

The parties have agreed to release each other from all claims, including any by Mr Greenberg and Mr Smith against AIG for indemnification of future legal fees and expenses or settlement costs.

An independent third party will decide how much the former executives can recoup for past legal fees and expenses, up to a cap of $US150 million ($162 million), that the insurer is legally bound to pay.