The National Insurance Commission (NAICOM) has introduced new regulatory requirements for life insurance companies underwriting annuity policies. This move aims to curb mismanagement in the industry and establish best practices to protect retirees who depend on annuities for lifetime income. The new regulations, effective from February 1, 2025, mandate stricter financial and operational oversight for insurance firms handling annuity portfolios.
An annuity is a financial product that allows retirees to receive periodic payments—either monthly or quarterly—using funds saved from their retirement benefits. Under Section 7(1) of the Pension Reform Act 2014, retirees aged 50 and above can purchase an annuity from a NAICOM-licensed life insurance company. This system ensures financial security for retirees, providing them with steady income for the rest of their lives.
Despite the benefits of annuities, some life insurance firms have failed to meet their financial obligations to retirees, causing significant distress among annuitants. A recent case involving African Alliance Insurance highlighted these risks, with many retirees left without their expected payments. Such incidents have prompted NAICOM to implement tighter regulations to restore confidence in the industry and prevent future occurrences.
Under the revised framework, life insurance firms underwriting annuities must appoint at least one qualified actuary responsible for Assets-Liability Matching (ALM) analysis and implementation. Companies are also required to submit quarterly ALM reports to NAICOM. These reports must align with the NAS Standards of Actuarial Practice (NSAP) and include corrective measures based on the analysis results to ensure financial sustainability.
The new regulatory framework is expected to enhance financial discipline and transparency within the annuity business. By ensuring that life insurance firms maintain adequate financial reserves and adhere to best actuarial practices, NAICOM aims to strengthen retirees’ confidence in annuity products. Industry players will need to adapt quickly to these regulations to maintain their licenses and continue offering annuity services.
Source: THIS DAY