No one shone a light into the black hole.

When the insurance giant American International Group nearly collapsed two weeks ago only to be saved in a government bailout, regulators, shareholders, and federal investigators could point a finger at the chief culprit: a brash and secretive unit that caused more than $18 billion in losses for the company

The unit, A.I.G. Financial Products, was run like a hedge fund out of London and Wilton, Connecticut. Specializing in derivatives, or complex financial contracts that were tied to assets like mortgages or commodities, A.I.G. Financial Products generated billions of dollars in profits over the years.

But in recent years executives of the parent company rarely questioned or sought to rein in the unit, former executives say. Martin Sullivan, who was ousted as chief executive of A.I.G. in June, had even eliminated a twice-a-month meeting to assess the work of the unit, according to a person formerly close to the company. "He wasn't really interested in the business," this person said.

Indeed, one of the few leashes on the financial products unit was removed when Hank Greenberg resigned as chief executive of A.I.G. in 2005, amid pressure from Eliot Spitzer, then the New York attorney general, and the Securities and Exchange Commission, this person said. 

A.I.G. Financial Products was "the black hole of A.I.G.," said David Havens, a credit analyst with UBS. "It's pretty apparent that no one really understood this stuff."

A.I.G. declined to comment for this article.

On a December conference call, A.I.G. Financial Products executives told investors that a write-off of all its credit derivatives rated single-A or below would produce a loss of only $421 million. "This is not anywhere near anything we think is going to happen," said the unit's chief executive at the time, Joseph Cassano. "There are some morbid questions we get about what happens if the world rolls off its axis and the world goes to hell in a handbasket."

Just months later, A.I.G.'s world would go to hell in a handbasket. The New York-based company reported in March that the unit had losses of $11.1 billion. That disclosure ultimately led to Sullivan's ouster. Investigations into whether the company had overstated the value of its mortgage-related derivatives soon followed. Its ratings were cut and its stock price slid toward zero. On September 16, the Federal Reserve jumped in to bail out A.I.G. with an $85 billion loan.

So how did one member of the A.I.G. family turn so quickly from favorite son to wild child?

It could do so because in recent years it was left alone, while it was regarded with awe and trepidation inside the company.

A.I.G. is a conservative global conglomerate whose core business is selling fairly boring insurance policies to business and individuals.

But the financial-products unit, staffed by quants with doctorates, was in the vanguard of the explosion in credit derivatives, competing with Wall Street and global banks in innovation and for clients.

"The image was always that they thought they were better than the insurance operations—that they were like investment bankers," a senior former A.I.G. insurance executive said

Randall K. C. Kau, a former senior executive at A.I.G. Financial Products, acknowledged, "Within A.I.G., F.P. had a cult status."

Yet the executive who built this leader in "Frankenfinance" had no background in quantitative finance. Cassano, a tough-talking native of Brooklyn, resigned as chief executive of A.I.G. Financial Products in March after the company surprised investors by disclosing losses at the unit.

Cassano was a protégé of A.I.G Financial Products' first leader, Howard Sosin. Both men joined the insurance company from Drexel Burnham Lambert, the Wall Street firm that grew into a junk-bond powerhouse thanks to Michael Milken. Drexel collapsed in 1990.

Three years earlier, A.I.G. Financial Products was created as a joint venture between Greenberg and Sosin.

Known as the "Dr. Strangelove of Derivatives," Sosin was regarded as a quantitative genius. He wrote scholarly articles on derivatives and briefly taught at Columbia Business School. Indeed, his inventive wizardry extends beyond the world of finance. He has registered numerous patents, one for a golf club that accommodates a golfer's special swinging style.

In his new job at A.I.G. Financial Products, Sosin was given an unusual deal: a 20 percent stake in the unit and 20 percent of its profits.

Under Sosin, the unit dived into the nascent world of derivatives. It later branched out into energy, currencies, and commodities, and bought assets from cattle to the London City Airport.