AIG’s most senior executives will have their base cash salary capped at $US500,000 ($539,000) – down 91% from last year’s levels – under orders from America’s “pay czar” Kenneth Feinberg.

In a letter to AIG CEO Robert Benmosche, Mr Feinberg says most base salary will be paid in the form of shares reflecting the value of a basket of four subsidiaries that the company, the Federal Reserve and US Treasury have identified as critical to the future of the company.

Mr Benmosche is not affected, having had his $US10.5 million ($11.3 million) salary and share package specially cleared by Mr Feinberg earlier this month.

Employees at the rescued insurer’s controversial financial products unit will receive only base salaries for the rest of this year, and those who pledged to repay existing retention awards must do so immediately. AIG Financial Products and its complicated, risky investments have been blamed for bringing the company to its knees in September last year.

And AIG’s aircraft leasing division has received a $US2 billion ($2.2 billion) lifeline to repay debt, drawing on US Government bailout funds. The loan to the International Lease Finance Corporation will be used to repay a five-year revolving credit agreement due on October 15.