Step forward all those who want to work in asset liability management in the insurance industry

Solvency II, the EU regulation directive for insurers set to come into force in January 2014, is already making itself painfully felt in a shortage of talent to meet growing demand in the UK’s asset and liability management (ALM) sector.

At headhunters Barclays Simpson, Dean Simpson says it can be “a nightmare” hiring people with the right skills, particularly as insurers have been unwilling to match the salary levels set by the banks.

Lloyds and RBS have ALM teams in Edinburgh, and Barclay Simpson are currently advertising a Head of ALM role in wholesale banking there for a salary of £140k plus bonus and benefits.

ALM as a growth sector was highlighted recently as a growth area by Goldman Sachs, which said in this presentation that outsourced insurance assets have risen from $502bn in 2004 to $1,191bn in 2010.

Martin Muir moved from Goldman – where he was a managing director in the securities division focusing on ALM and solvency solutions for insurance companies in Europe– to Aviva earlier this year in a newly created role as group asset and liability management director.

“There are almost as many approaches to ALM in insurance companies as there are insurance companies. Many (insurers) see a real opportunity in developing the capability to proactively manage the full range of suppliers from investment banks to fund managers” says Richard Baddon, actuarial and insurance solutions partner at Deloitte. The in-house teams they are building, he adds are “often a mixture of ex-bankers, investment professionals who are well-equipped not only to analyse strategies brought to them but develop complex hedging programs.”

At High Finance Group, director Mark Dainty says: “Insurers are speaking to the banks in an advisory capacity but creating their own ALM teams under the growth and development of their CRO (chief risk officer) and CIO (chief investment officer) functions. The challenge is how to resource them when the expertise is missing across the insurance industry. They are turning to the banks to poach people but face the challenge of the insurance industry not having the same remuneration structure.”

The role of the CIO is also becoming more prominent and ALM often sits in this area, he adds – pointing to Mark Versey, CIO at Friends Life who is building “an exceptionally high calibre ALM team.”