An American graduate in London

Tuesday 16 September 2008 marked a watershed in Kelly Lyles' career as an AIG employee. Having started as a graduate in New York in 1985, the now executive director of UK commercial lines suddenly found herself at the coalface when the insurer's future came under scrutiny. Question marks hanging over the insurance giant's financial situation prompted it to issue a circular to members of the British Insurance Brokers' Association asking them to call with any concerns and queries.

"When the crisis hit it was down tools" and everyone was answering phones and doing whatever it took," she recalls. "Tom [Docherty] was in New York and, as corporate accounts practice executive director, he would normally have been the Biba contact. But his absence meant I had to be there to answer the calls."

Surreal experience

What followed was, in Ms Lyles' own words, "surreal", as some brokers were taken aback that someone with a US accent was answering the phone in the UK, while others simply felt they had to dial the number even though they actually had no specific questions or points to raise. For certain brokers, the fact that Marsh was continuing to do business with AIG UK was comfort enough for them to carry on trading with the insurer.

"It went from people who were genuinely interested in facts to surreal conversations," she explains. "We were on the phone telling them everything we knew but it wasn't until Wednesday, when the US government stepped in, that we had something concrete we could tell them. Until that point there wasn't much comment we could offer."

Fast forward nine months, and things appear" like the weather" a lot brighter. Especially on the executive floor of AIG's Fenchurch Street office, where a combination of the mid-afternoon sun and glass windows have called for blinds to be pulled down.

"Since the [government bailout] we have had our results for the fourth quarter 2008 and first quarter 2009, and now feel we have reached the point where we are not looking over our shoulders; we are looking forward and have been strategising over the last few days looking ahead to 2010," she comments.

"For a few weeks back then we put a lot of things we were doing internally on hold, but many of us found the process rejuvenating. We were also very humbled and appreciative of the support we received from brokers and clients."

This focus on the future, rather than the here and now, has meant the company is back in product development mode" as evidenced by recent launches in the technology and media (a professional indemnity product) and renewable energy spaces.

However, Ms Lyles' warm demeanour is tested when another hangover from last year is mentioned" AIG cutting rates to retain business or "that old chestnut," as she refers to the speculation that was, to say the least, rife in the third and fourth quarters of 2008.

"I can assure you that internally that was not going on," she responds. "We have always looked at our price increases and retention rates, and scrutinise them a lot more closely now than ever before. We question why we have lost business, and one of the main reasons for this happening now is because the rate increases we are introducing are not been supported across the whole market.

"And you have to remember that every piece of business we lost due to a lack of confidence in AIG was being picked up by another carrier at the same rate we were writing it for. So, if we were dropping rates, so were others."

She also asks: "What's more, if someone was not sure about us and our future, why would we have been more attractive at a lower rate? Why would slashing the premium have made a client more comfortable with placing their business with us? I just don't understand the argument. I understand why our competitors were spreading it but I don't buy it. There may have been lines where we reduced rates, but there was a reason for it."

AIG UK works with "about 800 brokers" according to Ms Lyles, and she remarks that its remit continues to be "dealing with people that want to deal with us". "We look for those beneficial relationships where we are working with them" not exclusively but every day" so we can get a proportion of their book. We want a percentage of their market share."

Parting company

Despite the concerns of last September, AIG has parted company with only a handful of brokers, she insists. "We pick our partners carefully and, if we don't think things are working, we move on. But it is not like we have difficult conversations with brokers on a regular basis because when we enter into a relationship we both want it to work," she comments.

Interestingly, despite hailing from the US, Ms Lyles has never underwritten domestic insurance in her homeland. On graduating in 1985, she wanted to work for a company that allowed her to focus on global clients, having studied international business.

"AIG was one of the few companies out there offering graduates a move straight into that field. Most businesses wanted you to work for a few years before allowing you to switch to the international side."

Ms Lyles moved to London in 1989" a move tied to changes in the Companies Act, which allowed firms to indemnify themselves against losses relating to directors and officers.

"Up and until then companies were only buying D&O for their US operations. There were underwriters based in the UK that worked on US D&O, but there was nowhere for us to really hire from, so we had to ship them in."

Since then, Ms Lyles has worked predominantly in London, bar a stint underwriting continental European D&O in Paris. Having always worked in financial lines, she was promoted to her wider remit at the end of March 2006.

Despite moving on, she retains a fondness for talking about the evolution of the D&O market from a niche product, to a must-have cover. "Everyone back then [in 1989] was convinced that US-style litigation was coming and, as a consequence, we followed the US-style wordings. But, after four to five years, this wave of litigation had not appeared so we came up with a new policy. To do this we went to the claims people and asked them where they were declining claims" not because we were looking to find them, but we needed a product that covered what was required by our intended market."

Not only is D&O now an established UK product, its penetration has widened from FTSE 350 companies to other businesses. "We sell D&O to a lot of smaller independent brokers, because they are selling it as part of their portfolio now. This is no longer a peripheral line of business; it is something most businesses think about. And, once it is on the agenda, it stays there forever."

Asked where the next D&O-style opportunity may arise, Ms Lyles has no hesitation in suggesting environ-mental liability insurance. "This is in the same place that D&O was in in 1989. In that scenario we had changes to the Companies Act; for environmental, we have new European legislation that clients and brokers want to learn more about," she continues.

"And it is right brokers want to find out more. This offers a new potential revenue stream for them, and it's cheaper to sell a new line than to get a completely new client on board. As I said previously, once a cover is on the agenda, it stays on the agenda."

That is all very well, but there has been a lot of talk about insurance buyers seeking to cut back on cover, rather than increase their appetite for new areas of insurance protection.

"I have heard some brokers talking about [cutting back lines] but I don't think we have quantified that in our portfolio," Ms Lyles responds.

However, she admits the current market climate could be dubbed the "invisible hard market", because although rates may be increasing, insurance spend is static. This is because there is less risk to be covered due to reductions in headcount, wage roll and turnover.

"So a lot will depend on whether environmental liability is included in the budget of insurance buyers. With D&O we had a lot of interest in the early years with companies asking for quotes. And we found that they actually bought cover the following year because then they were able to budget for it."

As an AIG 'lifer', who has spent the vast majority of her career in the UK, Ms Lyles says she "keeps an open mind" about moving to another international challenge elsewhere within the group, stressing that any move would be difficult because "I love the London market. I can't believe you would ever get tired of it".

Knocked sideways

However, despite her own obvious love for AIG there are those who found last year unsettling enough to be attracted away from the business. "We lost a couple of people in energy, some in financial lines. But while we were all knocked sideways by what happened, most of us got up and continued on," she comments.

"And you have to remember that we have always had a turnover, people have always left AIG. It is a vibrant market, but I believe we have the best people so it comes as no surprise to me when people knock at our door."

Ms Lyles admits to being "sad" that the AIG brand is going, and jokes that it would have been good to sort this out earlier so Manchester United could have emblazoned the new name and logo on their shirts for the final season of its sponsorship deal. Instead, she laments the lost "tremendous opportunity" but notes that the insurer will still be able to get its message and rebrand across around the ground.

"In many ways I am going back to working for the company I joined 25 years ago," she adds. "When I arrived at AIG it was a general insurer with a little bit of life and that is what we are going back to. We will no longer have all the bells and whistles, such as an air-leasing company or financial products and all those other things.

"It is still a big company" we haven't suddenly gone from being a large global company to an SME. AIG remains a major player and it is not losing any of the things that made it successful as an insurance company in the first place."

Asked about what the new brand may look like, Ms Lyles claims this decision rests in the hands of an agency, but predicts: "it will sound Mediterranean, I am sure".

Graduate opportunities

Having come through the ranks herself, Ms Lyles is enthusiastic about the opportunity AIG currently has to pick up the best graduates. And far from its past troubles being a turn off, she comments: "The graduate scheme is more popular than ever this year, because a lot of banks are not offering them. So we have seen a much higher standard and larger number of applicants."

But she has no misconceptions that the current crop will remain as loyal as she has been: "I think the younger generation are motivated by something completely different to what I was. Now it is unusual to stay in the same company from being a graduate onwards. There are three or four people from my training class that remain with the company, but now people seem to think that, after two years, it's time to move on."

As to how Ms Lyles will introduce herself to the latest intake of graduate trainees remains to be seen" after an incident last year she recalls as being "horrible".

"I told a group that it felt like only yesterday I was starting on the programme myself, when in fact it was some 23 years ago. Afterwards, one of them came up to me and said 'was it really 23 years ago you joined the company?' to which I replied 'yes'. He then added: 'wow, that was a month...' and, before he had finished, I chipped in: 'I know, a month after I got out of university'. To which he replied: 'No, I was going to say a month after I was born'."

Ms Lyles may have been left red-faced by the exchange, but it underlines the fact her exuberance for AIG remains as strong today as the day she stepped into its New York offices in 1985. And for that she should not be embarrassed.