Opinion: HK insurers face uphill battle in talent hunt amid new capital rules
Talent recruitment and retention have become a big challenge for Hong Kong’s financial industry post-COVID-19, particularly for insurers and their in-house investment teams as they enter a new risk-based capital (RBC) regime.
The new RBC rules, which took effect on July 1, require insurance companies to strengthen asset-liability management (ALM) as well as risk oversight of investment portfolios to balance regulatory requirements and financial returns.
It’s no easy task. As Sun Life International HuBS’s Chief Investment Officer Shiuan Ting van Vuuren told AsianInvestor recently, the adoption involves multiple teams and significant internal coordination.
Volatile markets add to the pressures on investment teams, which now have to approach strategies with an even more thoughtful approach to risk management. With insurers' complex balance sheets, investment teams need to stay vigilant from top to bottom as they assess everything from risky asset exposures to fixed-income durations and credit ratings.
“In the past, it was enough for investment chiefs to be experts in investment, and could leave ALM to the ALM team. But now, with RBC and new IFRS accounting rules, the person must also be an expert in ALM,” a senior investment executive at a major Hong Kong life insurer told AsianInvestor.
While many Hong Kong life insurers are multinational firms headquartered in North America or Europe, where risk-based capital rules are more established, local investment teams – particularly non-leadership roles – remain heavily dependent on the local talent pool.
“There is a limited supply of that type of talent in Hong Kong, because the market has never dealt with risk-based capital requirements before,” the executive said, highlighting hiring challenges across investment teams.
Recent appointments reflect this trend.
For example, the new CIO of AXA Hong Kong and Macau Torsten Blake-Bohm was promoted from the ALM team. The same applies to Manulife’s Asia investment team, whose former and new CIOs are both veterans in either corporate finance or ALM.
It must be noted that local insurers began their preparation for the new regime a few years ago, ahead of the official implementation.
In September 2022, when former AXA Hong Kong CIO and Asia ALM head Richard Chan joined FTLife as chief investment and ALM officer, it was clear that insurers were already considering the importance of making investment decisions from a total balance sheet risk and return perspective.
As insurers adjust to the new regime, risk and liability management will remain paramount. Those with the right expertise and team setup in place will be the ones to eventually deliver stronger investment returns in the long run.