Fears the BBA will swallow up the ABI are irrelevant, says deputy director-general Stephen Sklaroff. Elliot Lane reports

The Association of British Insurers (ABI) open plan office is a rabbit warren of cubby-holes and glass-fronted boxes. "He should be in his office, but he tends to wander off. He needs to be chained to his desk sometimes," explains Ros, Stephen Sklaroff's secretary.

It has been a busy two years for the deputy director-general, who has just returned from yet another of many trips to Brussels to discuss the EU Directive on Intermediaries. But he is relaxed and affable. With his uncanny resemblance to Private Eye editor Ian Hislop, you expect a confrontational, garrulous individual spouting public-school sarcasm. Not so. Sklaroff is disarmingly charming and seems to slide into a room and people's confidences - a consequence of 15 years in the civil service.

Having graduated as a biochemist and spent some years in research, he wanted to escape a career "sitting behind a bench".

He was headhunted (or poached depending on whom you talk to) from the Department of Trade and Industry (DTI) where he worked under three successive ministers: Margaret Beckett, Peter Mandelson and Stephen Byers. He recalls those times as an "education", but insists this is where he cut his teeth in the financial services sector.

"I was able to work with many companies in the financial services sector and had got increasingly interested in how the sector worked and its role in the economy. And during the final years at the DTI - working on the part-privatisation of British Nuclear Fuels - I had close contact with the City. That finally confirmed to me that it was an interesting sector," he says.

Insurance background
Moving to a job in the private sector was the ultimate aim, although when the position arose it seemed the ideal opportunity to rekindle an old professional relationship with ABI director-general Mary Francis. During the early 1990s, both he and Francis were seconded to the British Embassy in Washington.

"I was there from the old Department of Energy and she was there from the Treasury. We never worked directly together, but knew each other."

So did Francis pass your name to the headhunters? "I believe so," he says with a smile.

The ABI has been accused of becoming a "virtual sub-committee of the Treasury", as one insurer put it, because of the number of ex-government staff hired without an insurance background.

"That is not a description I recognise. We have created teams which are diverse and involve people with varying skills. There are people who have worked in government, for management consultancies, from insurance and even ex-journalists."

Two key issues on the agenda are the merger with the British Banking Association (BBA) and regulation. Now KPMG has been appointed to look at the merger process, the consultation between the two associations will start to pick up speed - though the idea is not new.

"The concept of a merger has been around for a very long time and definitely since I started here. It is such an obvious thing to be talking about in an environment with a single regulator, a single ombudsman service, a set of media profile/reputation issues and a consumer agenda to face.

"It has to be an obvious question to ask: is the current division of the representative bodies right?" Sklaroff says.

One voice
From this strategic level, the merger looks sound and he backs the "one voice" argument, but whether it works on a practical level, such as location, structure and overall governance, is what KPMG's consultation will address, he says.

"It is important to stress, though, this is not a done deal. We see a clear high level strategic argument, but before we go to the members, we must prove that it can work. It's an if, not a when, at the moment."

Senior industry executives say the chances of the merger going ahead have now moved from 80:20 against to 50:50.

Worries that the BBA may swallow up the ABI are not relevant, he says. "The issue is not size, but about representation. The BBA has a wide range of different types of banks in the association, and a vast majority are foreign-based wholesale banks.

"We have a large membership which incorporates insurance companies, niche players, life and general operators and composites. We have to make sure that the structure allows all those voices to be heard."

A rapidly changing regulatory regime which is "uncertain" is the greatest challenge for the ABI and his tenure. "One of the frequent points we make to the government and the Financial Services Authority (FSA) is that in business, an uncertain regulatory environment is not a healthy environment. And the longer it goes on, our members find it harder to know where to invest their capital which can stunt growth."

Backing the EU Directive is the ABI's official line, but Sklaroff believes there are pitfalls. "It's a case of the devil is always in the detail. We have concerns with the EU Directive on Intermediaries. If I had to summarise it, it's about getting a level playing field. Because the distribution systems within member states are very different. One blanket legislation could end up creating all kinds of distortions.

"There must be consistency, because otherwise the Directive could create more barriers to entry when its ultimate goal is to achieve openness."

Stephen Sklaroff CV
Born: Edinburgh

Education: graduated from Edinburgh University in 1980. PhD in biochemistry at University College, London in 1984

Career: Worked in a variety of government departments including the former Department of Energy and the Foreign and Commonwealth Office. Spent three years in the British Embassy in Washington during the early 1990s. Held a variety of posts in the Department of Trade and Industry, dealing with resource planning and the nuclear industry. Head of communications at the DTI for three successive secretaries of state: Margaret Beckett, Peter Mandelson and Stephen Byers.

Interests: Loves classical and jazz music. Favourite composer Bach and has been spotted at Phoenix Orchestra concerts.

Avid reader of historical biographies.