AIG Financial Products, the derivatives unit that nearly toppled the insurance company in 2008, is under fresh scrutiny after regulators alleged it may have failed to properly measure and manage risk, misled supervisors and investors, and lacked appropriate checks to limit outsized risk-taking.

The concerns, recently raised with AIG by the New York Department of Financial Services, the state’s top financial regulator, have led the department to escalate its inquiry into the company, according to people familiar with the matter.

It may take years for AIG to fully address the state's concerns, these people said the regulator noted. That delay in rectifying the company’s risk management practices may expose holders of AIG securities to possible harm.

AIG recently repaid the government for its $182 billion rescue of what was once the world’s largest insurer, delivering a profit. Bad bets in the company’s Financial Products unit on a type of derivative known as credit default swaps nearly sank the insurer. In recent years, the financial group has slimmed down, focusing less on business lines and generally reporting profitable quarters.

Last week, U.S. regulators preliminarily designated AIG as “systemic”, one of a handful of non-banks whose potential failure could threaten the nation’s financial system.

But the probe by the New York DFS, led by Benjamin Lawsky, could delay the company’s plans to fully put its toxic past behind it. Lawsky last year threatened to revoke the state banking license -- the equivalent of a corporate death sentence -- of Standard Chartered, a large U.K. bank, over alleged money-laundering violations.

Lawsky, who some bank attorneys privately said is the New York regulator they most fear, has set his sights on AIG, an insurer whose giant derivatives portfolio could once again damage the company and its stakeholders if not properly managed. As a result, AIG may be subject to heightened supervision, a prospect that may curb investing and limit earnings if DFS decides to rein in certain business lines or activities.

After recording losses of $101.8 billion and $8.4 billion in 2008 and 2009, respectively, AIG has since posted $34.1 billion in combined profit over the last three years. During this year’s first quarter, the company recorded $2.2 billion in net income.

AIG declined to comment. A representative for Lawsky declined to comment.

In its latest quarterly filing with securities regulators, the company said its Financial Products "portfolio continues to be wound down and is managed consistent with our risk management objectives. Although the portfolio may experience periodic fair value volatility, it consists predominantly of transactions that we believe are of low complexity, low risk or currently not economically appropriate to unwind based on a cost versus benefit analysis.”

AIG, already partly supervised by the Federal Reserve, is due to come under increased oversight by the Fed once federal regulators finalize the company’s systemic tag. Designation as a “systemically important financial institution,” or SIFI, carries with it stricter rules governing activities, capital, liquidity, dividends and executive pay schemes.

But until that process is complete and the Fed finalizes the rules that govern the systemic label, Lawsky’s oversight of the company may represent the government’s last line of defense against the kind of risk-taking that nearly rendered AIG insolvent during the financial crisis in 2008.

Already, Lawsky’s office has raised questions over how the insurer manages the risk of possible losses from its securities holdings. DFS also has challenged company models that attempt to estimate possible trading losses.

Regulators around the globe have been questioning banks’ use of “value at risk” models, known as VaR, since they proved inept during the financial crisis.

In a May 3 presentation to investors, the company said that the aggregate VaR on a portion of its derivatives holdings from the financial products division was “effectively zero.”

The regulatory concern from Lawsky’s office comes as AIG works to shed risk in its Financial Products division.

At its peak in 2008, the unit had $2.7 trillion in exposure to counterparties through derivatives and other obligations. As of March 31, that had been whittled down to $122 billion, according to the company.

The number of treading positions had fallen to 1,600, a reduction of 95 percent from the 35,200 positions the unit had in 2008.

“Over time, significant progress has been made to stabilize the company by reducing its risk profile and implementing an orderly restructuring plan,” the Federal Reserve Bank of New York, which oversaw a portion of the government bailout, says on its website. “Many of the risk areas that brought AIG to the brink of failure have been addressed, or are in process of being addressed, including the orderly wind-down of AIG Financial Products.”

The company declared in 2011 that it had completed its active wind-down of the Financial Products unit’s legacy positions.

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