NAICOM issues fresh annuity rules to insurance firms
The National Insurance Commission has issued fresh regulations on annuity business with effect from February 1, 2025, in a bid to sanitise that segment of the market.
An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You get a fixed amount of money for the rest of your life in return for a lump sum payment or a series of instalments.
In a statement on Friday, NAICOM released a circular outlining additional regulatory requirements for life insurance companies carrying on annuity business in Nigeria.
The circular, dated January 29, 2025, signed by Director (Innovation & Regulation) A.I. Adamu, issued to Managing Directors/CEOs of all life insurance companies, aims to enshrine best practices in the management of annuity portfolios by insurance institutions.
The new rules mandate that insurance companies are required to have at least one qualified actuary responsible for assets-liability matching analysis and implementation of its adoption by the investment team of the company.
A part of the guidelines read, “An insurer that does not have an in-house qualified actuary shall make arrangements for a qualified one from an external actuarial firm to take on the ALM responsibility on its behalf for an interim period of no more than two years, subject to the Commission’s approval for an extension for two or more years thereafter.
“The appointment of an in-house or external qualified actuary, who shall sign off all ALM reports as required by the provisions of paragraphs 3.4.3, 7.3.1, and 8.1.5(m) of the Prudential Guidelines, shall be subject to the prior approval of the commission.
ALM Reports: Companies are required to submit ALM reports to the commission quarterly, with requirements outlined in the circular such as required actions by insurers depending on the results from specific analysis applying guidance provided in the NAS Standards of Actuarial Practice.”
NAICOM said that insurance companies are required to comply with the new requirements, with the board of directors responsible for ensuring strict compliance.
Also, the regulator said that companies that are unable to cover the additional expenses imposed by the circular are required to transfer their annuity portfolio to another suitable insurance company within 180 days.
On the mandated ALM reports, the new guidelines read, “The ALM report shall be submitted to the Commission not later than 15 days after the end of every quarter in line with the reporting requirement stipulated in paragraph 3.4.3 of the Prudential Guidelines.
“Without prejudice to paragraph seven of this circular, where the annuity portfolio of an insurance company has more than 1,000 (one thousand) annuitants or the portfolio is valued at N5bn or more, the company shall submit to the commission the prescribed ALM report monthly, not later than the 15th of the succeeding month.”
