The National Insurance Commission has recently issued new guidelines for annuity business in Nigeria, describing it as an attempt to enshrine best practices in the management of annuity portfolios by insurance companies.

The guidelines issued at the end of January mandate insurance companies with annuity portfolios to have at least one qualified actuarial expert on their team.

The circular partly read, “An insurance company intending to carry on annuity business shall have at least one qualified actuary (as defined in appendix 1) who shall take statutory responsibility for the assets-liability matching analysis and implementation of its adoption by the investment team of the company.

“An insurer that does not have an in-house qualified actuary shall make arrangements for a qualified actuary 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.”

The circular added that an insurance company whose strategic business plan for its annuity portfolio will not support the additional expense imposed by the new guidelines shall, not later than 180 days from the effective date (February 1) of the circular, transfer its annuity portfolio to another suitable insurance company in line with extant insurance laws and regulations.

The issuance of these new guidelines comes on the heels of the sacking of the Board and management of African Alliance Insurance by NAICOM and the appointment of a new Board/management in October 2024. This followed complaints by annuitants of unpaid annuities for several months.

Since the appointment of the new board/management, complaints of unpaid annuity have persisted with several annuitants who spoke with The PUNCH, saying they were last paid in August 2024.

On the new NAICOM guidelines, an annuitant with African Alliance Insurance, Gbadebo Olatokunbo, wasn’t impressed, saying the harm had already been done.

He said, “It is always good for regulators to be proactive and not allow incidents to happen before they make policies. You know that it is the issue of the annuity with the African Alliance that would have led to that. They ought to have taken action before now instead of waiting. Since August, we have not been paid. CBN doesn’t wait for a bank to go down before taking action. Other government agencies should follow suit. They should not wait for issues to surface before taking necessary action.

“Though it is a good move, the harm has been done to our detriment regarding our annuity with African Alliance. Whatever NAICOM is doing now, I’m not impressed. I feel like after the issue of African Alliance, NAICOM has gone to look at the books of other insurance companies and found similar issues; hence, they have come out with these guidelines.”

Associate Professor at the Department of Insurance at the Lagos State University, Dr. Olufemi Abass, however, welcomed the development, saying it was a step in the right direction to strengthen that segment of the market.

“This is a welcome development, and if you remember, NAICOM just had an intervention in one insurance company with respect to its annuity portfolio, and we cannot underestimate the complaint of annuitants who are majorly retirees. I feel this is a fallout from the exercise. Perhaps these are the gaps that they have found while doing a stress test on life insurance companies. Looking forward, to avoid any similar issues that may arise, I want to believe it is the reason this directive was given by NAICOM, and this is a well-applauded directive to tighten up the process and to regularly open the books of life insurance companies, especially those who have annuity portfolios, so that they can quickly monitor how things are being done,” he said.

He maintained that these guidelines will help to tighten the operations around the annuity business, as they enable increased “oversight function over the life assurance companies and what have you.”

On the mandate for actuarial experts, Abbas said, “We cannot but emphasise the role of an actuary in the insurance business, whether life or non-life. I’m aware that some years back, NAICOM took it upon itself to train some actuaries who could take up these roles. We know that we have a dearth of these experts, but the issue is their role cannot be circumvented. What I also like about this development is that they will be monitored almost on a quarterly basis. I think it will strengthen operations, and it will not be an all-comers affair. Just because you are a life insurance company doesn’t mean you will be able to play in the annuity. You must meet the required regulatory provisions.

It is a welcome development; whether or not it will be diligently followed remains to be seen. It will have far-reaching implications on the insurance business in Nigeria.”

Dismissing claims that NAICOM was reacting, Abbas said it was better that the regulator make a move now rather than later.

“Regulation is an ongoing process, and risks are evolving; regulation is a way to tighten up loose ends. What I think NAICOM can also do is carry out stress tests once or twice a year to catch these kinds of issues that annuitants are facing. It is reactive, but it is not too late to find balance,” he concluded.


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