Shares in AIG-backed exchange traded commodities issued by ETF Securities (ETFS) have plummeted after the US insurer was hit by a rash of fresh ratings downgrades yesterday.

Among the worst-hit products are ETFS Livestock, which has plunged 81.06% since yesterday's close, while ETFS precious metals and ETFS petroleum have dropped 50.68% and 51.01% respectively.

ETFS says it is working on providing investors with liquidity after a number of firms stopped making markets in its AIG-backed Commodity Securities products as the US insurer’s credit rating slipped.

ETFS is looking at arranging collateral for market-makers and allowing holders to lodge redemption notices directly with the issuer to stimulate activity.

Battered insurer AIG backs ETFS firm Commodity Securities, which provides a range of exchange-traded commodities in classic, forward, short and leveraged forms.

ETFS’ physically-backed firms Metal Securities and Gold Bullion Securities, and Shell-backed Oil Securities, are unaffected by AIG’s problems, with ETFS reporting active markets in all of them.

ETFS said that AIG has continued to honour all its obligations under its agreement, including processing all creations and redemptions in the usual manner and paying all redemptions due on time.

The ETF provider outlined the nature of the agreement with AIG in a statement this morning.