LONDON, Ont. — A London, Ont., law firm has filed a proposed class-action lawsuit against ailing U.S. insurance giant American International Group.

The suit is seeking $550 million in damages from AIG on behalf of Canadian investors.

"The AIG class action arises out of (AIG Financial Products Corp.'s) credit default swaps and the crippling decline in AIG's stock price when the true effect of those credit default swaps became known to the investing public," law firm Siskinds LLP said in a statement.

"The AIG disclosures out of which the class action arises are currently the subject of investigation by law enforcement authorities, and are alleged in the class action to have caused massive losses to Canadian investors."

AIG was given a US$150-billion financial bailout by the American government this week after it reported $24.47 billion in quarterly losses.

The insurer, which also has operations in Canada, lost billions in the risky business of insuring against bond defaults.

Wall Street had feared that the conglomerate, which has its tentacles in various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy.

Lawyers say the suit was filed under Ontario's investor protection law.

A court must certify the class action before it can go ahead.