Leave a comment and share
Chuks Udo Okonta
Some insurance companies are cutting down on their uptake of N323 billion annuity business because they considered it to be so volatile and probed to inflation, Inspenonline can report.
Investigation by Inspenonline revealed that three life underwriting firms had drastically reduced their uptake of annuity and had resolved to focus more on retail operations.
Findings showed that payout on annuity is eating deep into the capital of the said companies, as one of them told this medium that annuity business has forced the firm to post negative results for over two financial years.
Another firm said the act of paying annuitants for life has not be favourable to its operations, adding that inflation often wipe out the premium paid by annuitants.
This sad development seem to be coming at a time the Nigerian Insurers Association (NIA) is imploring retirees to embrace annuity as a way of staying happy and guaranteeing steady income in retirement.
The unhealthy development will also affect members of the Trade Union Congress of Nigeria (TUCN), who, some of their leaders have being encouraging to take annuity as against programmed withdrawal, because of the payment structure of annuity which allowed annuitants received pension benefits as long as they live.
According to the National Insurance Commission (NAICOM) the insurance sector life annuity fund portfolio stood at about N323 billion at the end of the second quarter of 2019.
The information which was revealed by the Head, Commissioner for Insurance Directorate, NAICOM, Rasaaq Salami, noted that the figure represented a growth of 17.46 per cent compared to that of 2018 which was N 275 billion.
” Within the same period under focus, the cumulative total Retiree Life Annuity (RLA)
payouts stood above ₦122 billion as at end of the second quarter of 2019,” he said.
According to him, the RLA market has been in existence since the advent of the Contributory Pension Scheme (CPS).
Salami said the RLA portfolio has recorded 73,554 contracts purchased for a total premium of ₦342 billion as at end of the second quarter of 2019.
“This depicts 13.02 per cent and 6.21 per cent growth in count and volume, respectively, ” he said.
The NAICOM spokesman said that the growth during the last three years for RLA business averaged 34.28 per cent and 35.12 per cent in count and volume respectively.
He noted that the RLA fund portfolio growth averaged 27.46 per cent, notwithstanding the RLA cumulative total payments of N122 billion.
“The graph of the annuity payouts, premium receipts and portfolio fund balance depicts a clear representation as the difference between the cumulative premium amounts received and fund balance is small compared to the cumulative annuity payouts earlier stated.
“The above indicates growth in the RLA business and a positive future outlook for the business in Nigeria, ” he said.
The RLA is an insurance product and one of the available retirement benefit options for retirees. The product can be purchased from a Life Insurance Company licensed by the NAICOM and authorised to sell RLA under the regulation of retiree life annuity.