So why has the SME M&A market not been served when it comes to assurances and warranties or warranty and liability insurance? CFC’s head of transactional liability Gus Marshall (pictured) believes there are three main reasons.
“One of them is that the M&A insurance market, or the transaction liability market, has been so successful,” Marshall told Insurance Business, “in some ways maybe too successful as a product that there was no time to develop new products because there was so much to do was write. “
Another reason given by Marshall is the economic structure or monoline management model of general agents, which restricts MGAs from creating a scaled product. In Marshall’s view, his camp – which announced the creation of CFC Syndicate in April 1988 – is uniquely positioned and does not have the limitations noted above.
He noted, “CFC is an MGA, but it’s becoming more and more like a diversified insurance company. The established consortium puts us in a unique straddle position between an insurer and an MGA. Our success has enabled us to focus on such new innovations in transactional liability. “
“When we first started, SMB was always an important part of our business and we’re slowly becoming more than just SMB,” continued Marshall. “But it struck us that in our main business liability business we are playing in the lower spectrum of deals, but we have nothing pure SME – and that is pure SME, which suits us well.” Because one of the success theses of this product is that you do need to scale.
“And that is the third reason why no transactional liability product has been developed for the micro and SME market; that is, trying to industrialize and scale is a difficult underwriting process. “
According to the head of transaction liability, CFC has “rethinked and canceled” the underwriting process for assurances and guarantees and reinvented it for an SME policy in order to make it scalable. Part of the development is CFC’s experience as one of the largest SME cyber underwriters worldwide.
“The product design allows people to draw quickly, buy it at a great price, and not have to involve too many lawyers and consultants in sourcing the product, which are all characteristics of the major transactional liability market,” said Marshall, who added that the development of the new policy is far from over.
“A reality of product development,” he emphasized, “is that you are developing a product and it will evolve over time – and we assume that it will evolve because when you think of the SMB market, you speak They’re doing different things in different places for different reasons from millions of different types of businesses.
“One of the challenges I faced in putting it together was creating a fairly standardized underwriting process for an economy like the United States that is so mature and diverse with a myriad of different problems. That was the biggest challenge I had. “
In addition to the myriad of SMEs the product targets, CFC’s Private Business Policy will also be available to sellers in four different markets: Australia, the UK, the US and Canada. And since the agency “makes the market” in this case, Marshall said they are determined to adjust the offering so that it becomes what the market wants.
“The interesting thing about this product is that it’s the same product idea, but we had to develop it from scratch for each different market, which is a challenge,” noted Marshall. “We look forward to every market as this is just complete white space and no product is available. And I think our customers will likely buy it in different markets for different reasons.
“That underlines the evolutionary aspect of the product; We need to evolve and learn from our brokers and our clients as this product becomes more relevant and established, which I believe will be as it is a compelling proposition to give those who are leaving companies much more secure Offer. It seems almost unfair that this product has been withheld from SMB owners for so long, but has been available for high-quality investments. “
With the product that has just been launched, Marshall is right at the top of the agenda and is embarking on an educational journey with all CFC brokers. Because although the product’s formulations are worded so that they are easy to understand and in plain English (as with all CFC offerings), it is vital for Marshall to make sure everyone knows how to produce the business.
“There is no point in having a great product in the market if brokers don’t understand how to rank it,” he said as he set some goals for the future. “With regard to the priorities for this product, ideally we would like to write business in all areas in which we offer it in the first year. That’s a priority. “
Another broader priority is to keep the ball rolling when it comes to product innovation at CFC.
Marshall told Insurance Business, “This is not the last step in the overall innovation drive underway for both Transaction Liability and CFC. Our slogan, as cheesy as people might think, is the truth, and that is “a pioneer in emerging risk”. This is a good example and we want to continue the momentum in new product development.
“It was amazing to see how successful the transactional liability market has been, but we also recognize that the currently addressable market is only a very small part of the broader M&A picture. And we believe there is tremendous opportunity in all sorts of different products. It is therefore my priority to make Private Enterprise a success and then to continue this innovation boost in order to continue to serve our brokers and our customers with new ideas, new products and new solutions. “