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R&Q’s Randall urges caution on Rhode Island legislation

The yet-untested Rhode Island legislation allowing US carriers to exit discontinued insurance business may not live up to expectations, Randall & Quilter (R&Q) chairman Ken Randall has warned.

In an interview with The Insurance Insider following his firm’s 2017 results, the executive said the commentary around the capability of Rhode Island to be able to execute the equivalent of a UK solvent scheme of arrangement was “probably a bit premature”.

“In the UK there is a lot of resistance from policyholders and pressure put on regulators to think about [solvent schemes] very carefully,” Randall told this publication.

“I think the same will be true in America, and even if you can get [the portfolio] through Rhode Island, you’ve got to think about the potential implications for policyholders domiciled in other states as well. I don’t think that it is necessarily the solution that some people think it might be.”

There is hope in legacy circles that the new Rhode Island framework would unlock a whole new batch of pent-up US liabilities for run-off carriers. However, the first deal to be executed in the state is yet to come to fruition.

Pro Global has been working with Swiss Re and Berkshire Hathaway to do the first transfer under Rhode Island's Regulation 68, but nothing has yet been concluded.

Other US states, including Oklahoma, Connecticut and Vermont, are also looking to enact laws which encourage the transfer of run-off liabilities.

R&Q received a licence last year to operate in Rhode Island so it could take advantage of the new regulatory framework if needed.

But Randall said the Rhode Island office was just one part of R&Q’s “weaponry” and, while his firm would likely take business to Rhode Island eventually, it was not a big part of R&Q’s current portfolio or business plan.

R&Q is successful in picking up legacy portfolios resulting from the natural ebbs and flows of commerce – such as the mergers and demergers of commercial industrial companies, Randall explained.

“That’s where we see opportunity and that’s where you need the licensing to deliver the solution,” he said.

In the same interview, Randall also expressed confidence in the future pipeline of legacy deals and the ability of run-off returns to be sustainable, despite the influx of capital from private equity and the live market.

He also told this publication that while R&Q did need more capital on its balance sheet to do the larger legacy deals, private equity would not be a “natural partner” for his firm.

Instead, R&Q is more likely to partner with other carriers – similar to its arrangement with Axa – to bid for larger deals, he said.

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