NAICOM Puts Out New Regulation on Annuity Business Underwriting
NAICOM Puts Out New Regulation on Annuity Business Underwriting
In its bid to checkmate mishandling of annuity business by some life insurance underwriting firms and usher in a regime of best practices in management of their annuity portfolio, the National Insurance Commission (NAICOM), at the weekend released a new regulatory requirements for life insurance firms underwriting annuity.
An annuity is an income purchased from an approved life insurance company by a retiree with his paid lump sum entitlement which he saves with an insurance firm as annuity to provide him with monthly or quarterly income during his/her lifetime.
Section 7 (1) of Pension Reform Act 2014 says that retirees or those who have reached the age of 50 could use the balance in their retirement savings account (RSA) to purchase an annuity.
It says they can purchase the annuity from a life insurance company licensed by NAICOM.
It further says the retirees could choose to receive payments monthly or quarterly.
One of the benefits of receiving retirement benefits through annuity according to insurance experts is that through annuity savings, retirees can receive payments for the rest of their lives.
However some life insurance companies keeping retirees’ annuity have in one way or the other betrayed the trust reposed on them by their annuity buyers.
It was against this backdrop that NAICOM has of recent become hard on life insurance firms underwriting annuity.
Findings revealed that the latest regulatory requirements by NAICOM may not be unconnected with the recent experience of some annuitants with one of the prominent life insurance underwriting firms – the African Alliance Insurance which kept its annuitants stranded as a result of its failure to meet its financial obligations to the insuring public.
NAICOM in its latest regulatory requirement on annuity said it took effect from February 1,2025.
According to the new regulation, life insurance companies underwriting annuity will be required to have at least one qualified actuary responsible for Assets-Liability Matching (ALM) analysis and implementation.
Such underwriting firm is also required to submit ALM reports to NAICOM 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 (NSAP).
