US based American International Group (AIG) has entered into a non-binding term sheet with Chinese state-owned insurer PICC Group to set up a proposed joint venture insurance agency company that will sell life insurance and other insurance products.

As part of the accord, AIG has agreed to subscribe for $500m of H shares of PICC Group in its planned initial public offering in Hong Kong.

Additionally, AIG has agreed not to sell over 25% of such shares in PICC for a period of five years, but is not restricted if definitive legal documentation for the proposed joint venture is not executed by 31 May 2013.

With an aim to be involved in reinsurance and other related business cooperation, the products will be distributed through a specialized agency on a nationwide basis with a focus on major cities in China.

The US insurer currently owns 9.9% of PICC Property and Casualty Company Limited, which is a subsidiary of PICC Group.

AIG trades in over 130 geographies, and offers property-casualty insurance products to commercial, institutional, and individual customers, in addition to providing insurance and retirement services in the US.