It’s one thing to talk about how to create a strong culture in a business, how to avoid making the same mistakes as other business leaders, or how to develop a strategic plan that differs significantly from what your competitors are doing. It’s quite another to be able to do something about what was discussed.
But that was the opportunity David Carson, head underwriter for K2 CAT, and Richard Coello (pictured above right), MD of K2 Financial, were given when they established K2 International, the London branch of K2 Insurance Services in San Diego. Coello stated that he and Carson were both employees of Pioneer Underwriting, which ran into financial difficulties and put any remaining business units up for sale. This is how the new company came to be.
“We talked to a few companies that were interested in hiring us,” he explained. “And when we met them, it seemed like a perfect match: they were only an MGA platform in the US at the time, but some of their units in the US already had London capacity, and they wanted to put together a London platform.”
Those early discussions gave him and Carson a clear picture of the opportunity to build something different, and he stated that the wider K2 group gave the K2 International team a lot of freedom and the exciting feeling of being a start-up again while being backed by a well-known $1.5 billion international brand from the start.
“We took about 30 Pioneer employees and formed K2 International,” Carson explained. “On the one hand, the only thing that changed for everyone was the name, but in reality, our entire culture has been turned upside down.” We could start from scratch and create a fantastic workplace. And I believe our first success was that we were able to make the deal with K2 at all, given that it was during lockdown and it wasn’t easy to make a deal.
Moving into management was an exciting step for Coello, but being in charge during the early days of the pandemic was terrifying. However, two years later, he is extremely pleased with the company’s progress. The company’s profit margin has increased from 4-5% to nearly 30%. This is because the company has been restructured to benefit its employees without sacrificing service quality. It now has a platform that is not only fit for purpose, but also ready for expansion.
He did, however, add that K2 International will not remain stagnant because its platform is ready for new teams and partnerships to help it grow. K2 International is actively seeking new ways to acquire businesses and teams in the United Kingdom and across Europe, with a particular emphasis on the people who work there. He stated that the team is unconcerned about the type of business in which it wishes to invest. Instead, it wants to bring in the right people and then provide them with a variety of support services.
“We’ve used this opportunity to completely rebuild our infrastructure, install a new underwriting system, and rebuild our data warehouse,” Carson explained. “Because I think one of the best things about K2 International is that we have top-notch information management, and our carriers keep telling us that K2 International is one of the best MGAs with which they work.”
Coello stated that when K2 International was referred to as the “Swiss watch” of their MGA portfolio, it was a high point because it demonstrated how hard the entire team had worked to get the platform to where it is now, and that the entire team should be very proud of the work it has done because the platform is fun to work on, and he wants new business units to take advantage of that.
K2 International has established a new insurance company.
“Of course, COVID and the lockdowns slowed us down a bit,” Carson said, “but now all we have to do is get our brand out there—that brand of “underwriting with a view.” We are, in the most literal sense, an underwriting firm. Many companies claim to be insurance companies, but they are not. We’ll put money up first, second, third, and fourth. That is what we must do.”
Coello stated that many MGAs are now mostly just distributors trying to sell as much product as they can for their market, which is one way to build an MGA, but he and his team at K2 International are confident that MGAs will outperform the index for the type of business they’re writing.
“What is the point of an MGA if it does not assist carriers in performing better than they could on their own?” “That, in my opinion, is and should be the primary goal of an MGA,” he said. “As a result, underwriting with a view encapsulates our fundamental core belief that we’re here to underwrite, select risks, and build profitability for our carriers, with everything else – the benefits to us and the income that comes from successful underwriting and getting good results for our carriers – coming second.”
It’s not something that most MGAs provide, according to Coello, but he and Carson have seen firsthand how this philosophy is resonating with entrepreneurial underwriters who are tired of the way the market works. He also stated that working for K2 provides a strong sense of ownership because you own your business unit and, by extension, your results.
“That is not the way all MGAs are set up,” he explained. “So, if you join a platform like K2, you have to be fairly certain that you’re going to do well, because if you don’t, you won’t get anything in return.”
“Some people will be upset and will not want to be a part of something like that.” But that’s how we’re wired. That, I believe, is what makes us appealing to underwriters looking to start their own businesses in a stable environment. That is what distinguishes us, and we believe some types of underwriters will appreciate it. And we want to talk to underwriters in the same way.”