In April of this year, a pioneer in the legacy business, Ken Randall, officially retired. He handed over the reins of R&Q to his chosen successors. An industry leader in legacy business that he co-founded with Alan Quilter in 1991, an industry which is now worth over $800bn according to PwC. We had a fascinating opportunity to chat with him in April and hear his insights about the history of legacy business. While this scant summary cannot capture the scope of his career, which will span 57 years in June of 2021, we offer some episodes that give us a perspective on the development of his success in the business.
Ken is an accountant by profession, and no doubt by proclivity since he left school at age 16 to become one. While some educational backfilling was pursued along the way, he began his career as an accountant in the publishing area. An acquaintance at Lloyd’s convinced him to take a job there, where his background in publishing was quite suitable and precisely what was needed. At the time, Lloyd’s was a leader in marine business and maintained a significant number of journals and publications utilized by the industry, such as the Lloyd’s List daily newspaper, Lloyd’s Loading list and the Shipping Index. Thus, his entry into the business brought him into the corporation of Lloyd’s rather than one of the syndicates which gave him a unique perspective on the business. Unlike most of its competitors, Lloyd’s is a market established by and, having a financial structure dictated by, parliamentary legislation—a structure that, at the time, was largely outdated. Lloyd’s was growing exponentially with tens of thousands of individual “Names” (investors) attracted by the potential profits. The governance systems at Lloyd’s were outdated and the accountancy and solvency systems were no longer fit for purpose, creating a rich environment for Ken to become the “problem solver” and exercise his entrepreneurial bent. This later served as the basis for his entry into run-off which is “all about solving problems.” He observes that initially legacy business was mostly focused on claims and commutations but today it is just as much about insurance capital management.
He doubts that there would be an extensive audience for a book about his exploits at Lloyd’s, because in his view insurance may touch millions of people but the industry itself is a small, albeit global, village. But he has witnessed and did indeed investigate some of the more notorious scandals at Lloyd’s. In the 1980s, Lloyd’s was in crisis and scandals exposed “problems” such as Ian Posgate, a controversial Howden underwriter, issues surrounding the Alexander Howden Group, a leading participant in both brokering and underwriting activities on the exchange, Peter Cameron-Webb’s fraudulent reinsurance dealings and other situations which eventually led to the departure from the market of high ranking members of the Committee of Lloyd’s,which oversaw the operation of Lloyd’s. The Bank of England took an interest even though Lloyd’s was a “self-regulating” body, and part of Ken’s duties was to keep the Bank informed of what was going on. It was a fascinating time for him because he would leave his house in the morning not knowing what the day would hold and then read about another scandal on the train on his way to work that would set out the challenging agenda ahead.
Ken was always an entrepreneur, keen on forming new ventures. He was fine working for someone as long as he was the one making the decisions. That lead him to form his own business, R&Q. He saw opportunities and he was willing to take risks, including the risk of losing his own money, which he believes is part of the true definition of “entrepreneur.” He built his business by assembling a blend of skills, not just kindred entrepreneurial spirits: “I always tell people you can recruit the 11 best goalies in the world but that will not give you a great soccer team.” Group thinking is not always a good thing; you need a variety of opinions. And while you need a variety of skills, people on your team with keen attention to detail are critical; claims people, in particular, need to have this skill, because “wordings” matter. If you have people who can pay attention to detail and work harder and smarter, you will achieve better results on legacy business.
Has he seen long-term change in the run-off business? In the early days, opportunity came from the “soft market” and failure to appreciate the risks. He and Alan Quilter joke about it now, but if an underwriter was seen meeting with R&Q it was almost certain they had a problem that needed solving and there was a certain level of shame associated with that. It is a different world now and the capital management service provided by his firm is viewed as a profitable segment of the market. One of the key opportunities for the legacy market going forward is to address the unexpected entrapment of funds that worries many insurers and their investors; the legacy market is there to take over distressed assets. It should not be surprising that there has been a recent surge in ILS (Insurance-linked securities) which provides enormous opportunity particularly if you can “simplify the product” and “reduce friction costs.” But “you need to address the entrapment issue.” He feels that regulators do not always appreciate the benefits of the efficiencies that can be put in place to handle a group of similar portfolios; rather than common services with effective checks and balances, regulators seem to prefer each portfolio to be handled individually. Success in legacy business demands creativity and innovation – witness the changes over the past 30 years. You must have controls in place, but if you impose too much control, you limit innovation.
What is next for Ken Randall? He cannot go directly from the busy life he has led to sitting on the beach and he does not enjoy a purely advisory role. So as a segue to retirement he has agreed to tackle a couple of projects as an independent, in situations where his past experience will be of significant value. He is a keen squash player and swims every day in the ocean. He also enjoys sailing and intends to do more of that. He also plans to spend more time with his grand kids.
During the course of our chat, we did not eliminate the opportunity for a “tell-all” compendium of all the insurance industry problems he has had a role in solving. We did see a story arch emerge —legacy business should not be described at cocktail parties as being “an undertaker for the insurance business” but rather a vibrant and profitable sector of capital markets. Ken is an inspiration to the core tenets of AIRROC’s mission and will continue to serve as an icon of legacy business professionalism.
