Royal Exchange Board To Review New Solvency Policy For Insurers

One of the major issues up for discussion when directors of Royal Exchange Plc hold an emergency meet on September 11, 2018, is a review of the new National Insurance Commission (NAICOM) circular on the Tier-Based Minimum Solvency Capital Policy for Insurance Companies, dated August 27, 2018.
Thursday’s statement by Sheila Ezeuko, the company secretary to the Nigerian Stock Exchange (NSE), said the board will, beside considering an update of the proposed investment in the company, review its planned restructuring of the business.
The new policy, the commission said has become necessary, following a consensus on the need for fresh capital injection, judging by the telling effects of the 2008 global financial crisis and recent economic recession in Nigeria, on Insurers. These, it was noted, has resulted in the inability of some insurers to honour contractual commitments they have made, besides the improper capital structures that can lead to the extinction of the insurance industry.
The need for the policy was also premised on the fact that insolvencies have become more common, eroding public confidence in insurance, while the insurance industry declines
The “Tier-Based Minimum Solvency Capital” (TBMSC) structure is a complimentary measure to the ongoing implementation of the Risk-Based Supervision (RBS) programme.”
The Recapitalization Programme is aimed at promoting soundness and profitability of insurers through optimal capitalization; support the stability of the financial system; introduction of proportionate capital that support the nature, scale and complexity of the business conducted by insurers;
Among others, a three-Level Tier-Based Minimum Solvency Capital (TBMSC) model; specifies capital requirement for each Tier Levels, based on Risk classification for each Tiers; no mandatory injection of fresh capital fund by insurers; no cancellation of licence of any operator is anticipated; but subject to solvency control levels. It is also specifies intervention levels; and specific actions to be taken by the Commission and
Operators on various level of impairment of the TBMSC; just as it opens up licensing window to interested investors at higher Tier Level.
The new three Tier Capital Levels directors of 100-yearold Royal Exchange would be considering at their meeting are: Tier 3 – Base Capital (Existing minimum paid up capital); Tier 2 – 50% additional on the Base Capital; Tier 1 – 200% additional on the Base Capital
The present review does not extend to Re-Insurance Companies.
At the moment, capital base for Life insurance is ₦2.0bn; while non-life is ₦3bn; and composite, ₦5bn; while reinsurers need ₦10bn.
Plans for the restructuring was first muted in February at a media parley by the company’s chief executive, Alhaji Auwalu Muktari, as part of celebrating the group’s Centenary this year.
The exercise will involve restructuring of its key operations, to enable the group and its various subsidiaries become nimble, efficient and able to respond to the ever-changing demands and needs of its clientele across the country.
According to Muktari, “our restructuring process rests on three main pillars, namely Digital Transformation; Efficient Distribution Channels and Business Process Remodeling”.
While approaching the next 100 years, he noted the importance of a reassessment of the company’s fortunes, to enable it “devise plans and strategies for the next century in order to remain relevant now and in the years to come, while satisfactorily meeting the expectation of all stakeholders.”
On digital transformation, Muktari said the company seeks “to build and develop digital tools as an enabler to reach our clients and conduct more efficient back-office operations. This will entail our deployment of digital solutions that will ease our business operations and also the use of various social media tools to reach our current and potential clientele today and tomorrow. By developing and deploying various business applications, we believe that we will become more nimble and able to respond quickly to change, whenever it comes.”
As part of the restructuring project, he spoke of the Group’s desire to develop and implement an efficient and cost-effective distribution channel that will support the company’s earlier objective of being nimble and give the group leverage in delivering products and services faster and better and more reliable to its teeming clients in Nigeria.
“As a group holding company with five subsidiaries across the insurance and financial services landscape, it has become of vital importance that we seek to improve our efficiency across the group by leveraging on cost discipline, astute capital allocation and investments and deployment of operational know-how to make Royal Exchange Plc a leaner, faster, smarter organization, equally adept at meeting the ever-changing needs of the consumer, wherever they are, offering them products and services they want, when they want it and how they want it,” he stressed.
One of the new growth areas for the company, he continued, “is our foray into the agriculture insurance, adding that this will definitely be one of the core areas of emphasis going forward.”