50 years later, innovation is still the watchword for Lexington Insurance

by Caitlin Bronson23 Sep 2015
When Lexington Insurance Company was founded 50 years ago, it was one of just a few insurers specializing in the writing of surplus lines coverage. Four people worked for the company, which started with $3 million in gross written premium from its property/casualty business.

A lot has changed since then. The Boston-headquartered insurer is now the largest surplus lines carrier in the country, claiming a 9.4% share of the market and writing more than $3.7 billion in premiums as an AIG company.

The essentials, however, remain the same. Just as in 1965, Lexington is a leader in insuring what many consider uninsurable – and creating products that influence how other carriers approach risk.

In the past five years alone, the company has created solutions for the alternative energy industry, craft breweries, mandatory home evacuations and the commercial fallout resulting from celebrity scandal. Lexington and AIG Aerospace also joined together to launch a product for unmanned aerial vehicles, and the insurer is currently exploring robotics – an industry projected to be one of the top-performing sectors in the US by 2060.

“Whether or not the standard markets are prepared for these kinds of risks, our E&S underwriters are able to react quickly with the freedom of rate and form,” said Matthew Power, head of strategic development with Lexington.

In order to ensure it’s ahead of the curve when it comes to new and emerging markets, Lexington runs what it calls “Innovation Boot Camp” – a 12-week program in which employees identify new commercial trends and ultimately develop solutions that are presented to AIG senior management.

And before detractors raise the issue of a lack of historical data on which to base rates, Power says Lexington is very careful to craft a solid underwriting basis that supports actuarially sound pricing and sustainable products.

“When it comes to insuring new industries, one can find analogous risks or proxies that inform underwriting. We do that and we take it quite seriously,” he said. “This is not a guesstimate. We work very hard to build the right coverage and find those tangible data points.”

In one instance, Lexington managed to craft coverage for hospitals in the event of nosocomial infections or outbreaks by researching CDC data on the number of outbreaks per state, the number of beds in each hospital and the number of hospitals per state, among other relevant information.

“One of the great things about our business is we’ve made significant investments in science and data analytics in order to provide greater insight into pricing new exposures,” Power said.

Yet even as Lexington continues to grow and harness new technological tools, the company is intent on preserving what has historically been the industry’s backbone: personal relationships. Independent insurance agents and wholesalers have frequently been the originators of some of Lexington’s most cutting-edge products, and that is no different today.

“As large as we are, management is very small,” said Power. “It allows us to be nimble and responsive. If agents see what they believe to be a trend that needs a solution, they should by all means contact us because these discussions are happening daily in life at AIG.”