WE’VE ALL thought it – those at the top never have to work to get there. They are handed their success. They’ve had it easy.
However, speak to David Walsh, CEO of
CFC Underwriting, the largest independent MGA in the London market, and you gain a new appreciation for what it takes to succeed. In founding his own company Walsh has had anything but an easy ride, first setting up in business 18 years ago with vision and promise, only to have the rug pulled swiftly from under his feet.
“I set up a business called Click For Cover to sell cyber insurance back in 1999,” he explains. “We were trying to sell it through this – at the time – brand-new distribution mechanism called ‘the internet,’ via internet service providers. I talked to British Telecom and got a deal to promote cyber insurance to all their business customers through their ISP arm. However, by April 2000 the dot-com bust came along and suddenly everyone was changing their plans – and now BT weren’t remotely interested in our deal any more. So the idea for the business fell off its feet.”
There was no clinging to the ropes for Walsh, however, as despite the crushing blow he noticed demand in another area: brokers were eager to learn more about the cyber product.
“We realized quite a few brokers were interested in cyber,” he says. “So at that pointwe rebranded the business from Click For Cover to CFC, and we haven’t looked back.”
The cyber vision
Many in the insurance industry are still trying to grasp the concept of cyber insurance in 2017. So how did Walsh and his firm see the potential back in 1999?
“In 1999–2000 there was a feeling that cyber insurance was the next big thing – it wasn’t just us; there was
AIG in America,
Hiscox in the UK, and so on,” he says. “It’s had lots of false dawns.”
While Walsh may make light of his ‘cyber vision,’ it came to him via an unusual career path. Having broken into the insurance business in 1992 as a professional indemnity broker at
Marsh in the UK, at the age of 23, Walsh spent four years at the global brokerage giant before becoming “employee number 15” at
Howden Insurance Brokers, an independent insurance broker, where he says he learned the entrepreneurial spirit from the company’s owner, David
Howden.
“No disrespect to Marsh or any other big company, but when you sit there it can all seem beyond your reach,” he says. “But working with David, it opened my eyes that it’s not impossible to have success in this industry.”
However, the path to success took a twist when, in 1998, Walsh headed to Israel to work as an in-house underwriter for an insurance broker.
“I took a binder with me, which meant I could sit in the brokerage and write for any trade within the professional indemnity classes,” he explains. “It’s one thing as a young man learning your trade in the city of London, but I don’t think there’s anything better than getting close to your customers – there’s no substitute for that. If you’re in a customer’s office and you don’t know what you’re talking about, you get found out pretty quickly.”
For Walsh it was the beginning of a journey of discovery as his visit coincided with the dot-com boom. “Though I went there to write any class of professional indemnity, suddenly the tech sector was super exciting,” he says. “In those days when those companies listed on NASDAQ, as a lot of Israeli companies do, many of them were paying over US$1m for their D&O insurance.”
That tech-focused explosion led Walsh down the cyber route, and the birth of CFC soon followed.
Cyber evolution
Despite only having one office in London, CFC now operates across 60 countries, enjoying particular success in Canada, the US and Australia, as well as on its home turf in the UK.
“Like any business we spend our energy where we are successful, and in Canada and the US the business has worked particularly well,” Walsh says. “We’ve built products around what the customer wants to buy, as opposed to a lot of insurers which build products they want to sell.”
Operating internationally, however, has given Walsh a clear view on why some brokers have taken so long to gain ground in the cyber insurance market – and how they could simplify their approach.
“Because the US market was penetrated first – and was often centred around US healthcare companies – that language crossed the Atlantic and was used in the UK and internationally, and perhaps that’s confused a lot of people,” he says. “For really everywhere outside America it’s primarily just about crime; from ransomware to business interruption, nearly all the exposures link to crime.”
Continued growth
Coinciding with the cyber insurance market finally taking off, CFC is enjoying a surge of its own. Back in March, it secured a third round of significant investment when Vitruvian Partners bought a 40% stake in the business for an enterprise value of £230m (approximately C$381m).
“We really like doing these deals every few years, because every time you do it you can recut the equity, and we’re really committed to wide and deep employee share ownership here – this deal has allowed us to move from 46 management and staff shareholders to 128,” Walsh says.
“The amount we own of the business has gone from 18% to 60%, so it’s a deal that we’re really excited about.”
But true to form, that deal brought its own unique bump in the road.
“I thought I left university with a degree, but it turned out, as I discovered recently when I had some due diligence done on me as part of the transaction, that actually I didn’t turn up to collect it, so I didn’t officially get it,” Walsh says. “So I have been unwittingly lying about it all my life.”
