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                                                                     Exhibit 5.1

             [LETTERHEAD OF KATHLEEN E. SHANNON, VICE PRESIDENT AND
        ASSOCIATE GENERAL COUNSEL OF AMERICAN INTERNATIONAL GROUP, INC.]

                                                              September 29, 2000

American International Group, Inc.
70 Pine Street
New York, New York 10270

Dear Sirs:

     In connection with the registration under the Securities Act of 1933, as
amended (the "Act"), by American International Group, Inc., a Delaware
corporation (the "Company"), of such shares of Common Stock, par value $2.50 per
share, of the Company (the "Securities"), issuable in connection with the Merger
(the "Merger") as contemplated by the Agreement and Plan of Merger, dated as of
August 17, 2000 (the "Merger Agreement"), among the Company, Engine Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of the Company
("EAC"), and HSB Group, Inc., a Connecticut corporation ("HSB"), I, as Vice
President and Associate General Counsel of the Company, have examined the Merger
Agreement and such corporate records, certificates and other documents, and such
questions of law, as I have considered necessary or appropriate for the purposes
of this opinion. Upon the basis of such examination, I advise you that, in my
opinion, assuming that the Merger Agreement has been duly authorized, executed
and delivered by HSB, when the registration statement relating to the Securities
(the "Registration Statement") has become effective under the Act, the Merger
Agreement and the principal terms of the Merger have been duly approved by the
holders of the outstanding shares of the Common Stock, no par value, of HSB,
each other condition to the Company's, EAC's and HSB's respective obligations to
consummate the Merger has been satisfied or waived, the Merger has become
effective pursuant to Section 33-819 of the Connecticut Business Corporation Act
and Section 252 of the Delaware General Corporation Law, and the Securities have
been duly issued as contemplated by the Registration Statement and the Merger
Agreement, the Securities will be validly issued, fully paid and nonassessable.

     The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Delaware, and I am expressing
no opinion as to the effect of the laws of any other jurisdiction.

     I have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by me to be
responsible.

     I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Legal
Matters" in the Proxy Statement/Prospectus which forms a part of the
Registration Statement. In giving such consent, I do not thereby admit that I
am in the category of persons whose consent is required under Section 7 of the
Act.

                                        Very truly yours,



                                        /s/  KATHLEEN E. SHANNON
                                        ---------------------------
                                             Kathleen E. Shannon