I have booked a flight through BA from MXP to CANCUN going via JFK, Its being operated by American.

Now im thinking about possible delays- if the first flight was delayed and i missed the 2nd one due to this what would happen? Do AA sort out accommodation ( as far as i see no other flights to cancun after on that day) or would i be stuck in New York. If that happens what is the likely hood of being provided with accommodation etc

If AA is delayed they are required to rebook you on the next available flight. AA has flights to CUN via multiple cities (DFW, CLT, etc) so if you are delayed have them check for connections and not just non-stop options.

If the delay is maintenance and you are forced to stay overnight in NYC, they AA will put you up. If the delay is due to weather, then you are on your own. There is no EU 261 compensation in the US...US airlines don't pay for very much (if anything) anymore. Also, if you are held up in NYC, AA will not pay for any hotel fees, etc you may be charged in CUN for no-showing. So if you are delayed and you know you are stuck in NYC, make sure you call your CUN hotel ASAP to adjust your details accordingly to avoid any no show fees and loss of reservations.

Thank you for the detailed answer- thinking about it should've booked the connection through miami ( less chance of bad weather at Xmas) but it was an error fare i believe and didnt want to miss out on it dithering

There certainly would be EU 261 comp if the OP's MXP-JFK is significantly delayed (assuming he's not proactively re-routed).

Travel insurance would certainly cover the cost of an overnight at JFK, but will probably cost more than one night in a hotel.

The main thing I'd be worried about - IF there is bad weather in NY and flights get cancelled it may be very difficult to get rebooked on alternate flights to CUN as they'll likely be full, if OP is flying around the holidays in late December.