View from the Top: George Stratts, Lexington Insurance

George Stratts was named CEO of Lexington Insurance Co., the excess and surplus lines unit of American International Group Inc., in November 2017. The appointment came a few days after AIG President and CEO Brian Duperreault signaled that Lexington would be repositioned as a stand-alone entity, as it had been for much of its history, part of what Mr. Duperreault said would be AIG’s investment in specialist areas. Before heading Lexington, which is the largest surplus lines insurer, Mr. Stratts, who has been with AIG for 19 years, was global president of AIG’s property and special risks division and, prior to that, executive vice president of Lexington. He recently spoke with Business Insurance Editor Gavin Souter about the changes at Lexington and what brokers and policyholders should expect from the insurer going forward. Edited excerpts follow.

Q: What changes can we expect from Lexington?

A: First, Lexington is highly specialized in handling the most challenging risks and doing so in a way that meets the needs of clients and brokers in terms of precision and speed. Having that dimension of risk expertise and specialization together with precision and speed, that’s going to be the hallmark of Lexington going forward.

To help drive those changes, there are a few things we are undertaking. Capability and functionality within Lexington, in our recent past, was shared across AIG. So things like claims and operations, finance, actuarial and legal, all of those areas were ones that were shared across the broader AIG organization. When you think about Lexington, it plays solely in the excess and surplus lines marketplace, and that marketplace demands a view that is focused and dedicated to that line of business and not necessarily shared. So the first thing is standing up those components to help provide Lexington with end-to-end capabilities.

The second piece is making sure that we have the right product leadership. So bringing in that excess and surplus lines expertise to complement our existing capabilities will be an important component to building out and starting up the Lexington company as we go forward.

The third piece, and it really is a hallmark of excess and surplus lines underwriting, is how do we foster a culture of creativity and innovation? We need to do this at the deal or individual account level without compromising the underwriting direction and the underwriting integrity that the company requires. So having that deal creativity and innovation will then create a stronger foundation from which we can build product innovation and service innovation.

Q: Are you on a recruitment drive at the moment?

A: We are actively looking to recruit. We’re looking internally and we’re looking externally. We want the best talent available to position Lexington for the next chapter in its history.

Q: What will brokers and Lexington policyholders see that’s different?

A: With a dedicated unit that fully reflects Lexington and our complete commitment to the excess and surplus lines space, the first difference will be ensuring we have a more responsive platform that reflects the way the excess and surplus lines market behaves and operates. The excess and surplus lines market space requires us to be different and to be quicker, so that speed to answer, speed of decision is what we want to build on.

In addition, the specialized underwriter should be and needs to be far more empowered, and we need to make them accountable for that decision but at the same time we need to support them in a way that enables them to make good decisions — to make that call using the full technical tools they have available to them, but also using their expertise and judgment in helping with that call.

Our policyholders and our broker partners should also see more of a willingness from Lexington to provide tailored, creative solutions. We’ll develop them in a way that allows our clients to move forward but also make sure that we’re making the right underwriting calls.

Finally, with the end-to-end unit that I mentioned where you have operations, claims, actuarial and finance all aligned to support Lexington, policyholders and brokers should feel that speed of service — whether it’s policy issuance, claims response or claims expertise — to match the underwriting expertise in this most challenging space in the marketplace.

Q: Where are you seeing opportunities for growth?

A: The starting point is being a better partner to our brokers. If we’re aligned on how we help them solve their problems and not necessarily having them solve our problems, that’s a good starting point for us. And if we shift the view of our underwriters to be orientated that way, then that’s an important first step.

We need to be more responsive to the market. Excess and surplus lines is highly specialized but is also quick, and that speed of decision-making will foster growth. One of the ways that we’re thinking about supporting that is through our technology platform and our process organization. We’re piloting a program with some of our key wholesale broker partners that allows us to be responsive in a 24-hour or shorter time frame.

Also, we need to be responsive to the changing nature of our marketplace. In some of the areas that we see developing in the E&S marketplace — whether it’s sharing economy, the influence of robotics in manufacturing or needs for integrating coverages — we need to be ahead so that we’re able to respond. Having that forward view is important.

And if rates are improving, that will drive growth, and there is a need for rate improvement across the industry.

Q: Are you expecting rate increases?

A: We’re seeing rate improvement now, and our expectation is that segments of the business need it. It’s on a continuum, and some risks are handled very differently than others. If you look at the excess and surplus property marketplace, if you are exposed and you’ve experienced a loss, which a big portion of the market segment did, we are in need of rate correction and rate improvement.

If risks have performed well and their rate levels haven’t changed significantly over the past five years, they should have a differentiated deal. Others have seen substantive rate reductions and experienced real losses, and they may see different responses.

Q: Are you seeing increases on the casualty side, too?

A: Around auto liability and some other challenging areas within the casualty classes. So some more than others, but we are seeing some positive rate movement on the casualty portfolio overall.