AdvertisementThe National Insurance Commission (NAICOM) as a regulatory body of all insurance firms has approved 8(eight) insurance firms to operate in Annuity Business going forward. Those firms are; Leadway Assurance Limited, Custodian Life Limited, FBNInsurance Limited, Cornerstone Insurance Plc, ARM Life, AXA Mansard Insurance Plc, Standard Alliance Insurance Plc and Niger Insurance Plc.
This action is as a result of the federal government through the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom) pending move to release of Joint Service Agreement, a framework that will regulate the administration of Annuity Business henceforth in the country.
According to the report 8 of the 26 life insurance companies have gotten regulatory approval to take fresh annuity business in the country leaving 18 life insurers behind in operations.
Currently, Annuity Funds stands at N167.8 billion, but with this approval, the volume is expected to rise rapidly in the coming months, as more retirees are now considering Annuity option at the expense of Programmed Withdrawal.
On that note that 18 firms may have to make giant steps to sign the service agreement with their respective Pension Fund Custodians (PFCs) so that they can continue to play actively in annuity business. Even, more insurers may come forward to be licensed in the coming weeks or there about, who know? in a move to implement the management of Annuity Funds as stipulated in the Pension Reforms Act (PRA) 2014.
The life insurance firms had earlier been restricted to take fresh annuity business until they sign a service agreement with their PFCs, but now, the successful eight underwriters can accept fresh annuity business from retirees, having complied with the new guideline.
The Annuity Policy is a financial product that allows for periodic payments to be made to the person who has made a lump sum or periodic payment to the insurance firm, in this case, Royal Exchange from a predetermined date. It could be of two types, namely; immediate and deferred.
Many opinion are predicting that The Joint Service Agreement will explain in details, how to pay the commission of agents and brokers who facilitated Annuity Business deals, as the current arrangement did not stipulate who pays the commission between the PFCs and the Life Assurance companies. Annuity Funds currently stands at N167.84 billion, with over 34,312 annuitants.
Before now, the issues surrounding annuity business has made life insurers lost businesses to the Pension Fund Administrators (PFAs) as retirees are only left with Programmed Withdrawals as a viable retirement window. While insurance operators are pushing for payment of commission from the annuity fund they mobilised, the current pension guidelines is against this.
Currently, all Life Insurance companies, providing life annuity for retirees under the Contributory Pension Scheme (CPS) have proceeded to open Operational Accounts with PFCs of their choice, as directed by the regulators.
The two regulators, had, through a circular, in March, charged life insurers that all new annuity purchased or being processed, should be domiciled in the dedicated account with the PFC referred to, stating that the treatment of all existing retiree life annuity funds and assets would be dealt with upon issuance of the joint regulations.
For instance; NAICOM, in it circular, enjoined Life Insurance companies to comply with the requirements, while the processing and approvals of new retiree life annuity requests shall continue forthwith.
While Pension Fund Administrators (PFAs) in other hand, were asked to resume the processing of new annuity requests for retirees and forward same to PenCom for necessary approval without delay, while PenCom was asked to ensure that PFAs transfer all approved premium for Retiree Life Annuity to the Operational Accounts opened by the Life Insurance Companies with PFCs.
The managing director/ CEO, AIICO Insurance Plc, Edwin Igbiti, one of the benefactor of approved annuity business line, speaking on this development saying due to ongoing tussle issues in Annuity, his company had to scale down its Annuity business, adding that the company will re-examine its approach after the PenCom and NAICOM finalised the arrangement.