The deal terms include about $2.74 billion in cash and $250 million of RenaissanceRe common shares, the companies said in their statements.

Shares of AIG were up 0.4% in extended trading, while RenaissanceRe stock was flat.

The insurance sector continues to see dealmaking activity as companies take advantage of defensive business models that fare better in times of economic uncertainty.

The cash consideration is expected to be funded through RenaissanceRe available funds and proceeds from the issuance of common equity and debt.

According to the deal terms, AIG will retain Talbot Underwriting and Western World, which were purchased as part of its $5.56 billion deal for Validus Holdings Ltd. in 2018. The divisions currently represent about $1.6 billion of AIG's total gross premiums written.

"For AIG, (the deal) further simplifies our business model and reduces volatility in our portfolio, while generating significant cash liquidity and capital efficiencies...," said Peter Zaffino, chairman and CEO of AIG.

The companies expect the deal to close in the fourth quarter of 2023.

On May 2, AIG had announced an agreement to sell crop insurer Crop Risk Services, also purchased as part of the 2018 acquisition of Validus, to American Financial Group Inc. for $240 million.

Evercore Group LLC and JPMorgan Securities LLC acted as financial advisers for AIG in the latest deal. Morgan Stanley served as financial adviser for RenaissanceRe.