HONG KONG (Reuters) - American International Group (AIG) said on Thursday it has signed an accord with Chinese state-owned insurer PICC Group to sell life insurance in the world's second largest economy after committing $500 million to PICC's planned Hong Kong initial public offering.

AIG also agreed not to sell more than 25 percent of its stake in People's Insurance Company (Group) of China (PICC) for a period of five years after the IPO, the U.S. company said in a statement.

PICC Group is launching an up to $3.6 billion IPO, with AIG and other investors agreeing to buy nearly 50 percent of the shares.

(Reporting by Elzio Barreto; Editing by Edwina Gibbs)