Annuity suffers again on non-inclusion of intermediaries in new guidelines

by Modestus Anaesoronye

May 22, 2017 | 12:25 am
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The complete absence of insurance intermediaries in the recently released joint guidelines on annuity by the National Insurance Commission (NAICOM) and the National Pension Commission (PenCom) has again stalled the take-off of the multi-billion naira annuity business that has foot-dragged as a result of regulatory disagreements.

The intermediaries, including insurance brokers and agents who play key roles in the distribution of insurance products in Nigeria, were not considered as part of distribution channels for annuity, as the template did not specify how they would earn their commissions under the new arrangement.

According to the insurance companies who reviewed the template, the issues are about who will pay brokers and agents their commissions, from which premium, since insurers are not going to have access to the money because it is domiciled with Pension Fund Custodians (PFCs)?

The insurance companies further argue that since it will require writing and getting approval from PenCom before money is released by PFCs, it is going to be difficult paying intermediaries for their services.

“There is also the issue of asset liability balancing in the event of loss in investment, where do we get the money to balance up?” they asked?

As at the end of September 2016, the total number of retirees receiving retirement benefits through the annuity plan stood at 34,312, while insurance companies have so far receivedN167.84 billion as annuity premium.

Edwin Igbiti, managing director/CEO, AIICO Insurance Plc, responding to questions on the annuity business, said “There are areas that need clarification, particularly the area concerning commissions of intermediaries.”

Igbiti further said that they are still awaiting the joint report from both regulators, to explain some of these grey areas in the new annuity arrangement.

He noted that underwriters cannot pay insurance brokers or agents, since the cash flow no longer passes through them, but moves within the PFAs and the PFCs.

“We can’t pay from our operations because we did not receive cash.

“When annuity assets are valued, it might result in profit or loss. When it results in a profit situation, we are going to book it but if it results in a loss, we will look for fund to close the gap, where is the fund going to come from?

We are interested in doing annuity business if the price is right. “We intend to sell annuity if the price is right. Just as we have said earlier, it was a deliberate decision last year, as a company, to reduce our exposure to annuity because of the volatility we see, as regards yield and exchange rate in the market.”

Funmilayo Omo, managing director/CEO, African Alliance Insurance Plc, said insurance companies are not receiving new annuity businesses for now, pending when both regulators are able to resolve some grey areas in the new guidelines.

“For now, all the retirees are taking programmed withdrawals, until when we return to annuity business. But the interesting thing about it is that they are allowed to move to annuity if they so choose.”

NAOCOM and PenCom had a few months ago, resolved the annuity impasse by agreeing to allow life insurance companies to open operational accounts with Pension Fund Custodians (PFCs) of their choice.

The regulators, in a joint circular to life insurance companies, said they were currently reviewing the regulation on retiree life annuity, which would be jointly released to the public in compliance with the PRA 2014 within three months of this notice.

The two regulatory bodies agreed to allow all new annuity purchased or being processed, to be domiciled in the dedicated account with the PFC, while the treatment of all existing retiree life annuity funds and assets would be dealt with upon issuance of the new regulation.

It will be recalled that Kemi Adeosun, the Minister of Finance, had intervened and brokered a truce between the regulators, directing them to issue a joint circular by Tuesday, March 21, 2017 that would supersede all previous circulars issued by the two regulatory agencies on the annuity matter.

The dispute was ignited by a circular issued by PenCom in November last year, directing life insurers to transfer custody of their annuity assets to PFCs and inform the commission accordingly.


Modestus Anaesoronye

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by Modestus Anaesoronye

May 22, 2017 | 12:25 am
  |     |     |   Start Conversation

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