AIG keeps key Paris employee,avoids possible default

NEW YORK, April 29 (Reuters) - American International Group Inc (AIG.N) said a key French employee will stay at the company, staving off the risk that his departure would leave the insurer in default on billions of dollars of insurance contracts.

James Shephard has agreed to serve as chief executive of Banque AIG, with overall responsibility for the bank, AIG spokesman Mark Herr said.

The Wall Street Journal reported that Shephard's departure could have triggered an AIG default on $234 billion of derivatives contracts.

If Shephard had left, AIG would have had to have appointed a new head that French regulators approved of, the Wall Street Journal reported. Otherwise, French regulators may have appointed their own head, which could have triggered defaults under change in control provisions on derivatives contracts.

Shephard had resigned last month, after concern about his "ability to conduct business in the current hostile environment," AIG said in March.

(Reporting by Lilla Zuill and Dan Wilchins; Editing Bernard Orr)