UPDATE 2-Travelers, Chubb stop AIG surety business-Marsh

(Adds comment from AIG, Marsh, no comment from Chubb)

NEW YORK, Sept 24 (Reuters) - Insurers Travelers Cos Inc (TRV.N) and Chubb Corp (CB.N) will no longer issue surety bonds with American International Group Inc as a co-participant, according to insurance brokerage Marsh Inc.

Surety contracts guarantee the performance of a specific obligation, and are often required for contractors working on public projects.

"This only affects future bonds," said Mark Nickel, head of surety for Marsh Inc, a unit of Marsh & McLennan Cos Inc (MMC.N).

A spokesman for Chubb declined to comment, and Travelers had no immediate comment.

AIG spokesman Peter Tulupman said the company was "disappointed that competitors are trying to take advantage of the current situation."

He added that there was a distinction between the troubles that have been dogging the parent company and the condition of its insurance subsidiaries.

New York state insurance Superintendent Eric Dinallo earlier this week affirmed that AIG's property and casualty insurance operations have more than enough capital for current and future claims, noted Tulupman.

Marsh executives, in a teleconference on the state of the global commercial insurance market, said that AIG's insurance subsidiaries continue to meet all of minimum capital financial guidelines.

However, some clients with AIG policies are asking questions about moving business to other carriers ahead of renewals, Marsh executives said.

AIG, once the world's most valuable insurer, narrowly escaped financial collapse last week by agreeing to an $85 billion U.S. government bailout. (Reporting by Lilla Zuill; editing by Jeffrey Benkoe and Gerald E. McCormick)