Sun cover: Derek Walsh, RSA
14 February 2011 | By Katy Dowell
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A baptism of fire was the perfect way to kick off a new role for RSA in-house legal chief Derek Walsh.
When Derek Walsh joined insurance giant RSA (formerly Royal and SunAlliance) as group general counsel in July last year he concedes that it was a baptism of fire. RSA was making its £5bn bid to acquire Aviva’s general insurance business, which ultimately failed.
“There’s no better way of meeting people and integrating yourself into a team,” Walsh says of his somewhat tumultuous arrival. “I’m not an easily intimidated person. I felt I became more involved quickly.”
Walsh sits on RSA’s group executive board, reporting to chief executive Andy Haste. It is a small but
well-integrated team that sees Walsh doubling up as company secretary.
Beneath him sits a global legal team of 130, which includes 70 lawyers, spread across three core business divisions: UK; the emerging markets, which covers Latin America, Asia, the Middle East and Central and Eastern Europe; and international, which covers Canada, Scandinavia and Ireland.
“The local legal teams report in to their local management and there’s a dotted line to me,” explains Walsh. “We have a very senior legal team and have invested in recruiting a high-quality team.”
With such high quality Walsh says the company prefers to keep as much work as possible in-house.
When the insurer acquired the Canadian underwriting business GCAN Insurance last October in a £260m deal, much of the M&A work and the subsequent integration of CGAN’s in-house legal department was left to RSA’s Canada legal team.
“It’s indicative of the quality of the people we have,” reflects Walsh. “I was involved, but only on a management level.”
Walsh says his personal mission is to make sure the company gets the best from its legal unit. The mission, he says, “is to make sure we use the legal structure in the most efficient way possible and capitalise on our resourceswherever they are in the world”.
There are, though, certain areas where the insurer does turn to external advisers.
Allen & Overy, Ashurst and Slaughter May sit on the company’s top-tier panel, with Linklaters drafted in for conflict work. The firms are instructed to advise on RSA’s hectic M&A and major transactions schedule.
In September RSA announced a panel shake-up for its second-tier roster, dropping Addleshaw Goddard and Eversheds in favour of Clyde & Co and Reynolds Porter Chamberlain, with Pinsent Masons retaining its place.
Walsh says the panel is reviewed on a notional three-year cycle. “We seek to use external lawyers in the most sophisticated way, but we do as much in-house as we can,” stresses Walsh. “There are areas where we don’t have the expertise, such as tax or property.
“Also, if we’re exceptionally busy on a project, we’ll go to external lawyers in a measured capacity.”
The emphasis is on delivering value for money, as it is for RSA as a whole. When Haste took over as group chief executive in April 2003 the insurer was in the midst of mass change as it moved to focus on its general insurance business.
In July 2004 RSA’s life funds division, which no longer wrote new policies, was sold to Resolution Life Group for £850m.
Then in 2007 RSA completed a deal to offload what was left of its US insurance business to its management there, finally ridding the company of its hefty US liabilities.
While RSA cut 1,200 jobs during the recession, Walsh insists that the business has come out of the downturn relatively unscathed compared with its banking counterparts. The biggest challenge facing the insurer now, he says, is compliance and regulation.
“The UK’s changing the regulatory architecture,” he explains. “We’re heavily involved with that. We lobby through our trade body, the ABI [Association of British Insurers]. We’re big players in the market and we want to make sure we’re regulated properly.”
Looming on the horizon is the implementation of Solvency II, the EU directive on insurance solvency levels, which is due to come into force in January 2013. Walsh says it is a topic that rears its head at every meeting.
“We support good regulation and management, especially if it improves solvency levels,” assets Walsh.
“The aim is to ensure regulation’s implanted proportionately.”
Managing a global team of 130 is no mean feat, but Walsh insists that investing in good-quality people has helped it run smoothly. It is clear he has stacks of enthusiasm for his new role.