Jeremy Johnson - Lexington Insurance

During the 2015 National Association of Professional Surplus Lines Offices (NAPSLO) Convention in San Diego, spoke with Jeremy Johnson, President & CEO of Lexington Insurance, where he discusses the transformational impact data and modeling has had on all industries like insurance, the “benign” 2015 hurricane season and the danger of insurance being commoditized due to the influx of alternative capital.

Mr. Johnson points out that 90 percent of the world’s data has been created in the last two years. The insurance industry increasingly revolves around the ability to collect, aggregate and analyze data, It helps analyze, differentiate and price risk, and to decrease the volatility of insurance businesses. It also enables the industry to move away from commoditized capital as a value proposition, and more towards risk expertise.

Commenting on the 2015 tropical storm season, Mr. Johnson notes that it has thus far been benign. But, he warns, we are only half way through. Hurricane Sandy occurred at the end of the 2012 hurricane season. That said, Mr. Johnson does not believe “even a big storm would have a meaningful impact on the industry.” He notes that the industry has received a lot of capital, intelligent capital using modeled risk. He believes, at least from Lexington’s standpoint, pricing and capital is to a point where “we can withstand the vagaries of a storm season.”

According to Mr. Johnson, there has been a significant increase in capacity in the excess and surplus lines (E&S) market due to alternative capital, mostly seeking yield in a depressed interest rate environment. Most of this capital is focused on catastrophic property risk, where it has depressed pricing at the reinsurance and insurance level. Mr. Johnson expressed concern over the possibility that the industry would be commoditized should it become more associated with capital. He believes “we are more than that, and can be far more than that.” He sees the industry’s value proposition as the ability to understand risk and how it is changing…the ability to develop products and services that address risk – a service proposition broader than a balance sheet and capital.

For more coverage of the 2015 NAPSLO Convention, visit the On Demand Library.

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