AIG has offloaded more than $US3.5 billion ($3.21 billion) in potential asbestos liabilities as it prepares for a major share sale.

The insurer’s “re-IPO” – which will allow the US Government to downsize its stake in AIG – is being dogged by uncertainty surrounding future liabilities in its asbestos book, which it has now handed to Berkshire Hathaway for $US1.65 billion ($1.51 billion).

Despite asbestos claims being excluded from AIG policies for decades, long-tail claims are continuing to hurt. In the fourth quarter of 2010, AIG took a charge of $US1.3 billion ($1.19 billion) after failing to properly fund its potential liabilities.

The company has predicted the sale of its asbestos book to Berkshire Hathaway will result in a deferred gain of $US200 million ($183 billion).

Berkshire Hathaway has previously invested in the asbestos books of other companies. Last year, it was paid $US2 billion ($1.83 billion) by CAN Financial Corp for its outstanding liabilities, while in 2006 it collected $US7.1 billion ($6.51 billion) in cash from Lloyd’s underwriter Equitas for picking up $US13.9 billion ($12.74 billion) in future liabilities.