NAICOM kicks as life insurers shun over N463.10bn annuity business


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Chuks Udo Okonta

The National Insurance Commission (NAICOM) has expressed great concern over the declining participation of life companies in Retiree Life Annuity (RLA) business, which is considered as huge emerging opportunity for the industry.

Retiree Life Annuity is pension benefit administered by life insurance companies, which provides pension benefits for retiree all through their lifespan and estimated to have pool of fund over N463.10 billion.


The Commissioner for Insurance, Sunday Thomas, who raised the concern yesterday at the 2020 Insurance Directors’ Conference, organised by NAICOM and the College of Insurance & Financial Management (CIFM) in Lagos, noted that operators in the insurance industry must strengthen their human and financial capital for effective participation in big ticket risks.

“It has been observed that the gains of domestication policy of the government as enshrine in the Nigeria Content Development Act 2010 is gradually loosing its meaning for the insurance sector. More businesses especially in the oil and gas and the Aviation sectors are now been re insured abroad.

“Of more concern is the declining participation of life companies in the annuity business which is the emerging business for our industry. These are the areas where the industry can impose itself on the economy through the control of funds for national development,” he posited.

Findings by this medium had revealed that about five life operators had cut down on their annuity business portfolio as volatility, inflationary pressure, and low returns on investment continue to hit their bottom line.
While three of the concerned firms have suspended annuity business, for now, two of them have reduced their volume as profit from this portfolio dips.

The underwriters reduced their risk appetite for annuity due to the current low profitability, just as more are expected to either suspend or slash their annuity volume in the next couple of months.

According to NAICOM, Retiree Life Annuity had depicted marginal growth as the portfolio recorded 83,917 contracts purchased for a total premium of ₦376,585,316,488.84 as at end of Q2, 2020, which depicts 2.69 per cent and 1.58 per cent growth in count and volume, respectively in Q2, 2020 from end of Q1, 2020, while the industry fund portfolio grew by 15.34 per cent from ₦401,513,860,403.49 in Q1, 2020 to ₦463,104,007,353.66 at the end of quarter under review.
NAICOM noted that the growth year on year during the last three years for RLA business averaged 25.45 per cent in volume, while RLA fund portfolio growth has averaged 37.22 per cent notwithstanding the RLA payouts made (i.e. cumulative total payments of ₦167,209,437,755.05 as at end of Q2, 2020).

The graph of the annuity payouts, premium receipts and portfolio fund balance depicts a clear representation with the fund balance (i.e. ₦463,104,007,353.66) being higher than the cumulative premium amounts received (i.e. ₦376,585,316,488.84) notwithstanding the cumulative annuity payouts earlier stated, NAICOM posited.

Further analysis of the periodical increments in the cumulative premium amounts received and RLA fund portfolio respectively, the insurance sector regulator said, depicts the growth rate for premium receipts is receding while the growth rate for the portfolio fund balance is volatile. This could be attributed to the volatility in interest rate.

NAICOM maintained that Retiree Life Annuity can be purchased from a Life Insurance Company licensed by the National Insurance Commission (NAICOM) and authorize to sell RLA under the regulation on retiree life annuity.

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