Annuity Funds have risen to N170 billion from about N145 billion it recorded in June 2016, with over 34,312 annuitants now subscribing to the scheme, Eyes Of Lagos findings have revealed.
This is coming just as the National Pension Commission (PenCom) has given approval to nine of the 26 life insurance companies to take fresh annuity business in the country.
The increase, according to findings, could be connected to the fact that more retirees are now considering Annuity option at the expense of Programmed Withdrawal.
The volume is expected to rise rapidly in the coming months, with more approval of life insurers by PenCom to play in the annuity business, just as it has currently given approval to nine life underwriters.
The approved firms are AIICO PLC, Custodian Life Limited, FBN Insurance Limited, Leadway Assurance Limited, Cornerstone Insurance Plc, ARM Life, AXA Mansard Insurance Plc, Standard Alliance Insurance Plc and Niger Insurance Plc.
Eyes Of Lagos, however, learnt that the remaining 17 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.
While investigation revealed that three insurers are going to be given approval to commence fresh annuity business latest by next week, more insurers 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 as well as comply with joint Annuity arrangement between PenCom and the National Insurance Commission (NAICOM).
Speaking on its resumption of annuity business after several months of quitting the business, the head of Retail, AIICO Insurance PLC, Mr. Sola Ajayi said, “We are open for business nationwide and have already started booking new annuity sales from all Pension Fund Administrators (PFAs)”.
AIICO Insurance, he said, is one of the pioneers of Annuity in Nigeria, having started Annuity sales since 2013, noting that the business has over 7,500 annuitants who are being paid their monthly annuities.
Ajayi said AIICO Annuity product is designed to pay customers for the entire duration of their life, no matter how long they live. “We are committed to the eradication of old age poverty in Nigeria, one person at a time”, he said.
He pointed out that AIICO Insurance asset backing annuity liabilities was in excess of N30 billion, which is a testament to AIICO’s commitment to ensure that all future commitment will be met as at when due.
The life insurance firms that were recognized by law to write annuity business 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 from a predetermined date. It could be of two types, namely immediate and deferred.
Eyes Of Lagos had earlier reported that both PenCom and NAICOM 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.
Before now, the issues surrounding annuity business had made life insurers lost businesses to 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 annuities 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 how to resolve the current annuity funds controversy, the Group Managing Director of Royal Exchange PLC, Alhaji Auwalu Muktari, said, “Losing over N150billion to the PFCs will result in a deep cut in the pockets of life insurance companies in Nigeria and will be the second time the insurance industry is losing a part of its business, after the transfer of Workmen’s Compensation to the National Social Insurance Trust Fund (NSITF).”