NEW YORK—American International Group Inc.'s decision to reorganize its Chartis Inc. global property/casualty insurance unit could strengthen AIG overall, industry observers say.

Under the reorganization, which took effect with its announcement last week, Peter D. Hancock, previously AIG's executive vp-finance, risk and investments, became CEO of Chartis. He succeeds Kristian P. Moor, who was named vice chairman and now reports to Mr. Hancock.

The reorganized Chartis will consist of two major global groups, commercial and consumer, with the supporting claims, actuarial and underwriting disciplines integrated into the two major business operations. John Q. Doyle, previously CEO of Chartis U.S., will run the global commercial business as CEO-global commercial business. Jeffrey L. Hayman, who was Chartis' chief administrative officer, is CEO-global consumer business. Both are responsible for their groups' overall underwriting and business results and report to Mr. Hancock.

In addition, Nicholas C. Walsh, previously president and CEO of Chartis International, will lead global distribution as vice chairman and chief distribution officer for Chartis. He also reports to Mr. Hancock.

The change re-aligns Chartis into commercial and consumer groups rather than international and domestic. In an interview last week, AIG President and CEO Robert H. Benmosche said from a risk manager's perspective, the change will make it easier to deal with Chartis.

“Our U.S. product people and underwriters generally got to the border and had to stop and hand it off to somebody else,” Mr. Benmosche said. “This eliminates any regional or country boundary. It gives people on the commercial side the ability to go where they need to go and integrate with people on a more global footprint.”

Also during the interview, Mr. Hancock said the reorganization will allow Chartis to “really serve our clients seamlessly around the world,” whereas the international and domestic divisions never were fully integrated. The change will “allow us to deliver better products in a more effective way, especially as our clients demand top quality and service wherever they operate around the world,” he said.

Before the reorganization, AIG last month denied Mr. Moor a full incentive bonus for 2010 because of “underachievement of certain financial metrics.” Mr. Hancock, who joined AIG in February 2010, received 120% of his 2010 bonus.

“This allows us to leverage Peter's broad executive skills,” Mr. Benmosche said. “It's really a partnership between Kris and Peter, but clearly Peter has the day-to-day responsibility of running it.”

Some industry observers say the change is important.

“I think the fact that they're doing it is significant,” said Clark Troy, research director at Aite Group L.L.C. in Chapel Hill, N.C. “After the reserves had to be increased for Chartis, that indicated that was unexpected, and that indicated there was some loss of confidence in the organization.”

AIG in early February boosted reserves at Chartis by $4.6 billion, with most of the reserve strengthening going to four long-tail lines of business.

“I think that is significant,” said Mark Dwelle, insurance analyst at RBC Capital Markets, a unit of RBC Dominion Securities Inc. in Richmond, Va. “It's an organization that has obviously been under a lot of stress, but the Chartis unit had always been one that had seemed to be relatively free of that.”

He noted that AIG reportedly is contemplating major stock offering. “I think you have to view (the reorganization) as a fairly significant move so close to that,” Mr. Dwelle said.

AIG was rescued from near-collapse in September 2008 with federal aid totaling roughly $180 billion, much of which has been repaid. As a result, the federal government ended up owning nearly 80% of AIG.

“Obviously, Treasury is working hard to get AIG and take it out on a road show and sell equity in it,” said Mr. Troy. “I would expect as the rally in the markets continues, Treasury very much wants to take advantage of momentum in the market in order to float some shares in AIG. The reorganization indicates there's a feeling that the structure of the organization could be improved.”

“My overall thought is it is both a succession-planning move for AIG overall and a strategic move intended to ensure the success of the ultimate sale of the government's ownership stake in AIG,” said John L. Ward, CEO of Cincinnatus Partners L.L.C. in Cincinnati. “I think Peter Hancock is fairly new to the AIG team, but he's done good work and impressed everyone.”

“A qualified fellow like Peter Hancock with strong financial credentials would be a very important asset to AIG on several fronts,” said Mr. Ward. “With the transition that's under way, he's an excellent person to be named CEO of Chartis.” Mr. Ward said that while Mr. Moor is a “very good property/casualty guy, all signs are what AIG and Chartis need right now is strong financial leadership.”

“I do find it noteworthy that it's a not an underwriter in charge of the shop, but beyond that I don't have strong view on that,” said Mr. Dwelle.

One analyst saw the move more as evolutionary than revolutionary.

“It is a reorganization, but is it significant to our rating analysis? I'd say no,” said Steven Ader, a director at Standard & Poor's Corp. in New York.

He said Chartis has been increasing its emphasis on personal lines as it has shifted its business profile to lower volatility lines. “It's an evolution,” he said.