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Solvency II compliance continues to drive demand for talent, despite market turmoil
With headlines like “Wall St Plunges In Trading Frenzy”, “FTSE 100 Index Plummets”, and “Another Blood Bath on Wall St” it can be difficult to keep the effect the credit crunch is having on the jobs market in perspective. Despite all the articles shouting about redundancies and the collapsing job market, some financial institutions are still hiring. The truth is financial services are down, but not out. If companies are going to survive in this environment, they need to protect themselves from both current and future risks. The Solvency II regime will come into play in 2012 and, despite the current crisis, insurers cannot afford to ignore the changes that need to be made now. The opening salvos in the war for Solvency II talent are already being fired.
Insurers are waking up with a bang to the necessity of adopting an enterprise wide approach to Solvency II. Banks were at the head of the financial services pack in terms of enterprise risk and capital management, but now the failures of Basel II are sounding a warning toll. Banks’ application of the Basel accord left them open to the arbitrary loopholes that ultimately led to the credit crunch. The insurance world cannot afford to make the same mistakes. ]
Relying solely on actuarial input to manage Solvency II is not enough. We only need to look at recent events with AIG to see this. Insurers need to invest in people who not only understand Solvency II, but also understand the issues in the context of their own business. They need talent not just with technical knowledge, but also the ability to communicate it throughout the company.
Although the deadline for Solvency II is four years off, insurers and reinsurers need to be preparing themselves - developing their internal model and establishing its parameters. Even at this stage, companies need to be training staff and developing awareness of the directive and its implications for operations. And increasingly they need to be implementing their model in the decision-making and risk management process.
In some quarters, preparations for Solvency II are well under way - and with around 5,000 firms authorised to conduct insurance business across Europe, demand for experts is strong. In this candidate driven market, interim Solvency II experts are commanding £800 per day in the UK and €1000 across Europe as a whole. These figures are still rising as demand spirals. Permanent position candidates with knowledge of Solvency II have also gained increased bargaining power. These candidates are automatically achieving pay levels in the upper quartile of contemporaries’ salaries - CROs with Solvency II knowledge can command up to £250,000 in the UK and €270,000 across the rest of Europe. Even in today’s markets, they’re looking at bonuses of around 60%.
This is because the right talent is scarce and to be an expert in Solvency II requires a skill-set foreign to the world of insurance. This is highlighted by the fact that, despite the failures of Basel II, many of the principles are transferable; and on the professional services side we are already seeing high demand from the insurance sector for consultants who have commercial experience of advanced risk and capital management techniques within their banking client set.
The insurance world is struggling to secure Solvency II experts from within its own talent pool. Solvency II is concerned with prudential supervision and not the conduct of business - there has to be an organisation wide shift from understanding rules to understanding principles. The experts brought in to implement the change are at the forefront of the growing links between risk and strategic management. They need to be able to provide portfolio-wide risk oversight and expert counsel to the board. These roles not only demand keen strategic awareness, but also an acute understanding of how decisions are made and executed within the organisation and the ability to ensure risk takers also play their role in effective risk management.
The changing market dictates the need for candidates with good communication skills as well as an excellent knowledge of insurance risk and business strategy. It sounds like a tall order. But for the right candidates, even in the face of wider market turmoil, the rewards remain high.
Simon Crabb is Head of Interim Management at executive search agency, GRS
