As the federal government of Nigeria through the National Insurance Commission(NAICOM) and the National Pension Commission (PenCom) concludes the release of Joint Service Agreement, a framework that will regulate the administration of Annuity Business, eight of the 26 life insurance companies have gotten regulatory approval to take fresh annuity business in the country, LEADERSHIP learnt.
The approved firms are; Custodian Life Limited, FBNInsurance Limited, Leadway Assurance Limited, Cornerstone Insurance Plc, ARM Life, AXA Mansard Insurance Plc, Standard Alliance Insurance Plc and Niger Insurance Plc.
Leadership, however, learnt that the remaining 18 life insurers are making frantic step to sign the service agreement with their respective Pension Fund Custodians (PFCs) so that they can continue to play actively in annuity business. More insurers, according to an insider source, are expected to be licensed in the coming weeks, in a move to implement the management of Annuity Funds as stipulated in the Pension Reforms Act (PRA) 2014.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.
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. LEADERSHIP had earlier reported that both PenCom and NAICOM have had a meeting, where the idea of releasing a Joint Service Agreement was mooted.
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.
NAICOM, in the circular, was enjoined to ensure that Life Insurance companies comply with the requirements, while the processing and approvals of new retiree life annuity requests shall continue forthwith.
Pension Fund Administrators (PFAs) 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.
Speaking on this development, the managing director/ CEO, AIICO Insurance Plc, Mr. Edwin Igbiti, said, because of the ongoing issues in Annuity, his company had to scale down its Annuity business, saying, the company will re-examine its approach after the PenCom and NAICOM finalised the arrangement.