HARTFORD, Conn.—The federal government and five former insurance executives accused in a sham reinsurance deal sealed over a decade ago agreed to settle the matter, with the executives admitting that aspects of the deal were fraudulent.

In a motion filed Friday in U.S. District Court for Connecticut in Hartford, the federal government said that “the parties have reached agreements to resolve this matter.”

“If these agreements are approved by the court, it would obviate the need for the filing of the pretrial motions as well as any other pretrial and trial proceedings in the case, thus saving the parties and the court significant resources,” according to the motion.

The retrial of Ronald E. Ferguson, former General Reinsurance Corp. CEO; Christopher P. Garand, former Gen Re senior vp in charge of U.S. finite underwriting; Robert Graham, former Gen Re senior vp and assistant general counsel; Elizabeth Monrad, former Gen Re chief financial officer; and Christian M. Milton, former American International Group Inc. vp for reinsurance, had been slated for Jan. 22, 2013.

But earlier this year, U.S. District Court Judge Vanessa L. Bryant agreed to a series of delays in pretrial motions, during which the parties continued to discuss a resolution of the case.

Under the agreements, which were made individually with each defendant and announced Friday, the government agreed to defer prosecution of all of them for 12 months.

If at that point the government finds they are in compliance with all material aspects of the agreement, it “shall seek dismissal with prejudice” of the indictment within five days of completing the 12-month period.

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As part of the agreement, each defendant acknowledged that aspects of the transaction were “fraudulent,”" that the transaction itself was “highly unusual” and raised “red flags” that suggested that that transaction would be “improperly accounted for.”

Each defendant must also pay a fine.

Messrs. Ferguson and Milton were fined $200,000 each, which has been paid. Ms. Monrad was fined $250,000. Mr. Garand was fined $150,000 and Mr. Graham was fined $100,000. All are to be paid within 30 days of the court's approval of the agreement.

Among other things, the defendants must inform their supervising pretrial service officers if they plan to leave the country or change their residence. They also must “refrain from violation of any law” other than minor offenses, such as speeding.

Neither the attorneys for the defendants nor the U.S. attorney's office responded immediately to requests for comment.

A jury in 2008 convicted the five former executives on charges of conspiracy, securities and mail fraud, and making false statements to the U.S. Securities and Exchange Commission stemming from a loss portfolio deal in 2000 and 2001.

Prosecutors alleged the defendants devised the deal to artificially bolster AIG's loss reserves, costing AIG investors as much as $597 million as word of the SEC investigation emerged and the stock price declined.

The executives all received prison sentences and fines.

Last August, however, the 2nd U.S. Circuit Court of Appeals overturned the convictions and said U.S. District Court Judge Christopher Droney erred in allowing prosecutors to use a line graph tracing AIG's stock price, which the three-judge panel said was prejudicial.

In March, Judge Bryant set the retrial for 2013.