2014 Lexington Innovation Report

The world’s risks, technologies, business platforms, laws and regulations are constantly on the move. At Lexington Insurance Company, we examine, anticipate and respond to these changing dynamics. That is how over the past five decades Lexington has brought to market so many first-of-their-kind insurance products. Products that our customers — and the industry — have quickly realized they cannot do without.

It was Lexington that first developed insurance for employment practices liabilities in the early 1990s. After September 11, 2001, we were the first U.S.-based surplus lines insurer to put forth capacity for property terrorism exposures. As laws and regulations evolve, we respond — with everything from insurance for historical tax credits, to coverage to upgrade properties to new standards of resiliency and sustainability.

For all of us at Lexington and AIG, insurance is synonymous with innovation. Ours is a business of hustling every day to be the most valuable insurer to our customers. We do that by being there — year in and year out — with sound, creative solutions that are supremely relevant for risks today and tomorrow.

In 2014, we took our longstanding culture of innovation to new heights, launching three Innovation Bootcamps, which focus the energies of our colleagues across multiple disciplines to identify emergent exposures and build insurance to respond.

Fueled by the forward thinking of those throughout our organization, Lexington launched more than a dozen new products, services, and facilities last year alone. And our new product pipeline is more robust than ever.

Here, we share snapshots of some of the best of our 2014 innovation efforts developed to meet our customers’ ever changing needs.

Jeremy JohnsonPresident and CEO, Lexington Insurance Company

Unmanned Aircraft Railroad Liability Protecting Truckers Historic RehabCyberSafety Expanding Portfolio PartnershipsPrivate Security Evacuation EnvironmentalResidual Value

Right on Time

Unmanned Aircraft InsuranceWith the unmanned aircraft industry poised for takeoff, AIG Aerospace launched the award-winning Unmanned Aircraft Insurance policy, which provides physical damage and third-party liability coverage explicitly for the exposures of unmanned aircraft. AIG Aerospace and Lexington launched the Unmanned Aircraft Liability Endorsement, an endorsement to Lexington’s Commercial General Liability Insurance, which extends this specialized coverage to various sectors using unmanned aircraft, including public entities, agriculture, and construction.

Get the facts about the Unmanned Aircraft Industry

Unmanned Aircraft

Integrating Unmanned Aircraft Systems (UAS) into the National Airspace System is expected to contribute $82.1 billion to America’s economy via agriculture, public safety, and other applications by 2025.1

1AUVSI®, The Economic Impact of Unmanned Aircraft Systems Integration in the United States, report available at www.auvsi.org/econreport.

Keeping Railroads On Track

Rail SuperCatAs demand for North American class 1 railroads booms, so does the exposure. While rail traffic is way up, so is the number of railcars transporting potentially hazardous materials.

Lexington and other AIG companies stepped up to provide the heavy-weight balance sheet protection for these railroads: The Rail SuperCat Excess Casualty Liability Insurance packs up to $1 billion in limits per occurrence — one of the largest capacities available to the rail industry from a single insurer.

LexRail ResponseSM

As railroads transport hazardous materials, they need to be prepared for the complexities of responding to an accident involving dangerous cargo. LexRail Response gives Lexington’s railroad clients priority access to specialized resources to respond to emergency environmental incidents, including pre-qualified contractors at reduced rates. It’s the latest addition to our Crisis Management Services for Railroads.

Railroads get the large limits they need along with the expertise to respond to potentially catastrophic losses.

Unmanned Aircraft Railroad LiabilityRailroad Liability Protecting Truckers Historic RehabCyberSafety Expanding Portfolio PartnershipsPrivate Security Evacuation EnvironmentalResidual Value

Watching Out for Private Security Companies

GuardSecure® PlusSecuring our world is an ever-changing task. Coverage for those shouldering the burden must keep pace. GuardSecure Plus, the next generation in coverage for private security firms, does just that by providing comprehensive professional, and general liability coverage and services customized to respond when and where these companies need it.

From extending coverage to volatile territories and independent contractors, to addressing potential dangerous vulnerabilities in traditional bodily injury, property damage and wrongful act insurance, GuardSecure Plus provides the protection private security firms seek now.

Private SecurityPrivate SecurityUnmanned Aircraft Protecting Truckers Historic RehabCyberSafety Expanding Portfolio PartnershipsEvacuation EnvironmentalResidual ValueRailroad Liability

Evacuation

Keeping Families Safe when Nature Strikes

Mandatory Evacuation CoverageAnyone who lives in a windstorm- or wildfire-prone area knows it’s a real possibility: Suddenly, there is an official order to drop everything and get out of the path of an oncoming hurricane, tropical storms or wildfire.

Always looking to make life easier — and homeowners insurance most effective — Lexington designed Mandatory Evacuation Coverage. This endorsement expands our LexElite® Homeowners Insurance to reimburse customers for living expenses they incur when complying with an evacuation order handed down by a civil authority in conjunction with a wildfire or named storm.

EvacuationUnmanned Aircraft Protecting Truckers Historic RehabCyberSafety Expanding Portfolio PartnershipsEnvironmentalResidual ValueRailroad Liability Private Security

Protecting Truckers

Protecting Truckers’ Good Names

Identity Misrepresentation CoverageA growing trend is costing truckers dearly. Fraudulent cargo pickups are resulting in lost shipments — and unhappy customers — for motor carriers. An endorsement to Lexington’s Motor Truck Cargo policy Identity Misrepresentation Coverage provides critical protection for these events, reimbursing the insured for covered expenses associated with identity misrepresentation that results in a deceptive pickup and stolen cargo. Learn more via the Motor Truck Cargo video and highlight sheet.

Protecting TruckersUnmanned Aircraft Historic RehabCyberSafety Expanding Portfolio PartnershipsEnvironmentalResidual ValueRailroad Liability Private Security Evacuation

CybersSafety

Standing Up to Cyberbullying

Lex CyberSafetySM CoverageAt least 25% of teenagers with tech access report being cyberbullied — and that number is growing.2 With this rise in cyberbullying has come a significant increase in cyberbullying cases in federal and state courts.3 Lexington has been collaborating with the Cyberbullying Research Center in an effort to educate adolescents and their families on issues of cyber safety, and build much needed awareness of internet and social media safety. We also introduced Lex CyberSafety Coverage, an endorsement to our LexElite® Homeowners Insurance, that helps parents and guardians respond sensitively and effectively when their teen or adolescent is accused of cyberbullying. The endorsement provides coverage for counseling expenses for affected persons, public relations and media management service fees, and legal liability. Notably, coverage does not respond when parents or guardians had knowledge of the cyberbullying event and failed to either prevent it or notify authorities. Learn more.

2http://cyberbullying.us/facts/3Nissenbaum, Gary, et al., Potential Legal Approaches to a Cyberbullying Case, American Bar Association, The Young Lawyer, July/August 2013 (Vol. 17, No. 9) available at www.americanbar.org/publications/young_lawyer/2012-13/july_august_2013_vol_17_no_9.html.

CyberSafetyUnmanned Aircraft Historic Rehab Expanding Portfolio PartnershipsEnvironmentalResidual ValueRailroad Liability Private Security Evacuation Protecting Truckers

Increase Cash on Cash Return

Residual Value InsuranceResidual Value Insurance (RVI) helps our commercial real estate clients achieve favorable loan-to-value ratios for credit tenant lease financings. RVI is available for conventional credit tenant lease financing, build-to-suit lease financing and sale-leaseback financing, providing the lender with protection against non-payment of a final balloon payment at the end of a loan amortization. RVI is the result of a collaborative effort among Lexington, AIG Global Risk Solutions, AIG Property, AIG Global Real Estate and AIG Asset Management, and complements our suite of lender-based insurance products.

Residual ValueResidual ValueUnmanned Aircraft Historic Rehab Expanding Portfolio PartnershipsEnvironmentalRailroad Liability Private Security Evacuation Protecting Truckers CyberSafety

Historic Rehab

Build the Future with Confidence

Historic Rehabilitation Tax Credit InsuranceBreathing new life into historical structures or buildings keeps America’s heritage alive. It can also be risky business for the owners, developers, and investors who benefit from federal and state investment tax credits that are earned through rehabilitation of historic structures. Enhanced Historic Rehabilitation Tax Credit (HRTC) Insurance protects those who own, develop or invest in properties qualifying for federal and state investment tax credits against financial loss they would suffer if this tax credit is recaptured due to loss or damage to, or an eminent domain taking of, the insured property during or following rehabilitation.

Lexington provides peace of mind for those behind Wrigley Field’s major rehabilitation project.

Historic RehabUnmanned Aircraft Expanding Portfolio PartnershipsEnvironmentalRailroad Liability Private Security Evacuation Protecting Truckers CyberSafety Residual Value

Environmental

Preparing Contractors for the Unexpected

Environmental Emergency Response Cost CoverageA forklift accidentally collides with an above ground fuel storage tank. A truck carrying liquid asphalt tips, spilling the substance onto the highway and an adjacent creek. A backhoe ruptures an underground chemical transfer line, releasing a hazardous chemical. Contractors are vulnerable to sudden environmental emergencies. Responding effectively to these incidents can be costly. Environmental Emergency Response Cost Coverage protects contractors by providing coverage for these expenses by extending their Construction General Liability policies to include emergency response clean-up costs resulting from a pollution event.

EnvironmentalUnmanned Aircraft Expanding Portfolio PartnershipsRailroad Liability Private Security Evacuation Protecting Truckers CyberSafety Residual Value Historic Rehab

Expanding PortfolioExpanding Portfolio

An Ever-Expanding Program PortfolioLexington and AIG are always looking to bring to market new programs that fill important market niches. Some recently welcomed programs include:

Appalachian Underwriters Low Value Insurance Program Efficient, affordable homeowners coverage.

WKH Woodworking Program Property and liability insurance for a wide range of woodworking plants and operations.

Aon Optometrists Customized protection for optometrists and optometric offices.

Alteris Bus Guard Package policy for school bus contractors.

CHI Custom Ag Harvest A package policy targeting harvesting and haulers of agricultural products, including forage harvesting, citrus, cotton, vegetables, peanuts, soy, and more.

Alteris Fuel Oil and Power Wrap Up Package policy designed for fuel oil & propane dealers.

RMS Nightclub Program Tailored for nightclubs, lounges, sports bars, pubs/taverns, family, and casual dining restaurants.

Alteris SepticoverPackage policy for septic contractors and pumpers.

Unmanned Aircraft PartnershipsRailroad Liability Private Security Evacuation Protecting Truckers CyberSafety Residual Value Historic Rehab Environmental

Partnerships POWER

Partnerships Power InnovationLexington is constantly looking to partner with others who share our commitment to cutting-edge thinking and enable us to strategically expand our distribution footprint. Recent new partners include:

AmRisc: Bringing Wind Capacity and Modeling to Market Through our alliance with AmRisc, a leading provider of U.S. wind capacity, Lexington delivers top-tier specialty property solutions for catastrophic wind and technical risks.

CorRisk: Expanding Professional Liability ReachOur strategic partnership with CorRisk, a member company of Ryan Specialty Group, efficiently delivers A&E Professional Liability Coverage for small firms and Professional Liability Insurance for landscape architects.

WKFC: Targeted Solutions for Small- to Mid-Sized Property RisksLexington has teamed up with WKFC, a leading producer of small- and mid-sized property risks, and member company of Ryan Specialty Group, to bring property insurance to this targeted group of commercial clients nationwide.

PartnershipsUnmanned Aircraft Railroad Liability Private Security Evacuation Protecting Truckers CyberSafety Residual Value Historic Rehab Environmental Expanding Portfolio

Do You Have the Next Big Idea for Lexington?We’d Love to Hear It.Contact Us at: lexingtonins@aig.com

Lexington Insurance Company, an AIG company, is the leading U.S.-based surplus lines insurer.

American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

© 2015 American International Group, Inc. All rights reserved.

Stay Connected: