Bad weather isn't all bad news for insurers.

"2006 is shaping up pretty much as we thought it would--we're seeing very, very heavy demand for catastrophe coverage; we're seeing some pressure on casualty rates, which we anticipated," said Kevin Kelley, chairman and chief executive officer of Lexington Insurance Co., a Boston-based unit of New York-based American International Group Inc.

"About a third of our business is property-related and approximately 50% of that is catastrophe-exposed," Mr. Kelley said. "That's the biggest product area right now."

Lexington, which is an approved nonadmitted insurer in all states except Delaware, where it is an admitted insurer, wrote $5.02 billion in nonadmitted premiums in 2005, an increase of 2.3% over 2004's $4.90 billion. Net income, however, surged to $315.82 million last year from $71.64 million a year earlier. The insurer's combined ratio also improved to 96.7% in 2005 from 101.8% in 2004.

That kept Lexington in the No. 1 spot on Business Insurance's list of the 10 largest surplus lines insurers.

"Our unique distribution network allows us to see more business than any of our competitors," said Mr. Kelley. "The fact that we have such a broad product arena allows us to touch clients in more ways than any of our competitors. If you add in the products and services that other AIG companies offer, that creates a very unique suite for product opportunities for clients."

Lexington writes in four areas in addition to property, said Mr. Kelley. These are casualty, high-limit excess casualty business written through fellow AIG unit Starr Excess Liability Insurance International Inc., program business and health care business, he said. Each category contains 10 to 25 products.

Additions to Lexington's product line over the past year or so include tax interruption insurance for municipalities to respond to financial losses when tax flow is decreased by physical damage to a commercial location; a property terrorism insurance endorsement that covers losses stemming from a military or civil order related to a terrorist attack or threat that impedes business operations; motor carrier coverage dealing with cargo theft; an outsourcing property policy; and, most recently, an evacuation response policy that covers expenses incurred by certain health care and educational institutions as a result of mandatory civil evacuation orders as well as a policy that protects real estate developers and lenders from losses due to changes in zoning laws.

Lexington's emphasis on catastrophe coverage reflects customer desires, Mr. Kelley said.

"We think that there's a very significant shortfall in the catastrophe market," he said. "We think that the market is short by about 50%. What we have done is we have committed to the market that we would maintain our gross capacity to the market and we continue to do that," on an individual account basis up to $25 million, he said.

"In addition, we've added to the property market in noncat areas. Frequently, what happens is windstorm is capped, so you might have an exposure where the windstorm is capped at $25 million or $50 million and we'd take additional lines," said Mr. Kelley.

"We're always looking at ways to help our clients the best we can," he said.