The National Insurance Commission (NAICOM) at the weekend issued new regulatory guidelines on annuity business to risk-underwriting companies in the country with effect from February 1, 2025, as part of its regulatory moves to promote transparency and enhance the efficiency of segment of the market.
An annuity is a contract between the insured person and an insurance company that requires the insurer to pay a fixed amount or a series of installment to the insured for a lifetime in return for a lump sum payment made the policy holder.
The insurance industry regulatory commission released a circular on Friday outlining new regulatory requirements for life insurance companies involved in annuity business in the country.
The circular, dated January 29, 2025, signed by Director (Innovation & Regulation), Mr. A. Adamu, and sent to Managing Directors/CEOs of all life insurance companies, indicated that the new guidelines were aimed at ensuring best practices in the management of annuity portfolios by insurance companies.
Specifically, the new annuity rules mandated insurance companies 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.
The guidelines partly reads: “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”, the commission added.
This is even as it mandated insurance companies to comply with the new requirements, with the board of directors responsible for ensuring strict compliance, adding that companies that are unable to cover the additional expenses imposed by the circular should transfer their annuity portfolio to another suitable insurance company within 180 days.
On the mandated ALM reports, the NAICOM’s new guidelines stated: “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”, the circular added.
