Lexington Insurance President and CEO JeremyJohnson radiates a relaxed enthusiasm that reflects the insurer'ssuccess in responding to market needs, as well as its consistentreputation among producers. National Underwriter sat down withJohnson to discuss Lexington's progress in the year since he tookthe helm.

What are some of the inroads Lexington has made in thepast year under your watch that you're particularly proud of, andwhat are some of the market areas that exhibit real growthpotential as we reach the midpoint of this year?

If you were to walk into any Lexington office, you would bestruck by the level of energy and just genuine enthusiasm forLexington, for AIG, and, frankly, for the market that we're in.We're very proud to be the U.S. leading excess and surplus linesmarket. We don't take that lightly; we don't get complacent aboutthat. I would tell you that our staff prides itself on working withour customers and brokers on leveraging that freedom of rate andform to develop new products and new solutions.

I'm most proud of the innovation culture that we're drivingthrough Lexington. We've put some real discipline, some realstructure behind ideation. We've developed an internalcrowdsourcing approach, if you like, to innovation to driveideation from the field and our pipeline of products has never beenmore robust. We have dozens and dozens of products in the pipeline,so I'm very proud of that.

The product that we announced last week, CyberEdge PC,demonstrates our ability to look across all of our commercialproduct lines and produce a unique solution for a market that iscrying out for a unique solution; to address those potentialcoverage gaps in all commercial and property & casualtycovers.

To have a product that's excess and [difference in conditions]so to the extent that there is coverage, you've now got morecoverage. To the extent that there isn't coverage, you've got a DICfeature. That doesn't exist in the market. It hasn't been addressedin the market and we've leveraged all of those capabilities, all ofthose product capabilities across AIG to produce this product.We're so proud of it and we did it really quickly as well torespond to our customers. You wouldn't believe the interest we'regetting.

I think it's the culmination of the culture that we have of thecompany now, which really is, leverage One AIG; work togetheracross our product towers to leverage that strength of thatfranchise. We think it's a true game-changer.

In terms of areas of growth, I would just watch the economy,basically, so energy, construction, transportation are areas wherewe see growth in the economy and we see growth in the market. Andthere are areas that traditionally have been solid areas for theE&S business.

What are you seeing as far as standard carrier appetitefor E&S-type risks these days? Any lines in which you see someother competition coming in and trying to get a share of where theyweren't a year ago?

There's no meaningful trend of business moving from E&S toadmitted. There are always some geographic pockets where you seethat happening and then reversing, but there's no major trend. Infact, if anything, I would tell you it would be the other wayaround.

If I think about some of our liability classes, liquorliability, restaurants, nightclubs, there's a lot of flow into theE&S business; E&S market from admitted. We continue to seetremendous growth in our cat-driven, personal-lines book as theadmitted market continues to pull back from cat-exposed business inthe commercial or personal lines. But for us, we've seen thatsignificant growth in personal lines, 20-plus points of growth. Ourenergy and our construction businesses are up double digits.

In general, we really do try to sell ourselves on the basis ofthe freedom of rate and form, on the basis of our ability to tailoror customize solutions for our customers. And, hopefully, that'swhat we do really well. So I preach innovation, specialization andcustomer centricity, and those three are pretty fundamental.

Lexington's been long known for pioneering new markets.Are there any new areas that you see in which people are riskingfor cover that might lead to the creation of newproducts?

Firstly, if you think about the societal impact of technology,big data, science, you've got a real convergence that facilitatesnew business models in a way that didn't really exist before. Soyou've got, if you like, an acceleration in the rate of newbusiness models. And the admitted market, it doesn't have thecapability to respond as quickly to new business models as thesurplus lines market.

If you think about biotech, robotics, those are industries thatarguably are going to power the future of the economy. And thoseare industries that have developing risks that lend themselves toan E&S approach. So I think that those are industries that cryout for E&S-driven solutions. And then I would also say, justthink about some of the legislation, think about the AffordableCare Act. We haven't had a piece of legislation like that in ourlives.

The amount of societal change that that's going to drive, thenumber of new business models, the amount of M&A activity, theconfusion as to what that act does, whether you're talking aboutfor consumers, for businesses, for insurance companies, what thefuture is, what the new risks are, they're very much emerging, verymuch developing—and we're committed to doing everything we can tostay ahead of understanding what those risks are so that we candevelop solutions for those risks. But they are evolving andemerging in real time. It's pretty interesting.

And then the other piece of legislation that is kind ofinteresting is the California Assembly Bill 32, which ispromulgating a market for carbon cap and trade. And that'sproducing evolving business models around trading of carbon creditsand, therefore, exhibiting new risks for which we're working oninsurance solutions. We have produced some and we continue to workon insurance solutions for facilitating that emerging market.