Annuity business: DG seeks autonomy of insurers
By Abdul Olalekan
The Director-General, Lagos State Pension Commission (LASPEC), Mrs. Folashade Onanuga, believes the management of annuity assets, should remains sorely with life insurers, due to risk factors associated with the business.
She added that the transfer of annuity assets to Pension Fund Custodians (PFCs) would ensure proper safe valve for the funds.
Onanuga, who spoke with Journalists in Lagos, stated that since annuity business entails underwriting risks, it should be fully domiciled in insurance companies, stressing that annuity operations is quite different from pension contributions, which has no risk elements.
She advised the National Pension Commission (PenCom) and her counterpart, National Insurance Commission (NAICOM) to quickly find a common ground in resolving the issues raised by the life insurers as well as pension operators, to find an amicable solution that will benefit all stakeholders.
Her commission, she said, had complied with the directive, stressing that retirees have the liberty to return to annuity after the three months mandate given by PenCom.
The battle for the soul of annuity business still continues between the pension and insurance industries, while this first quarter is going to give a clearer picture as to who controls the annuity business in the country.
On November 03, 2016, PenCom released a circular mandating all life insurance firms to return the N145.05 billion Annuity Fund in their custody to the PFCs.
The PenCom circular sent to Pension Fund Administrators(PFAs) and Custodians and signed by its Head, Surveillance Department, Muhammad Umar, said in line with the Pension Reforms Act (PRA) 2014, it resolved that the custody of retiree life annuity shall henceforth, be domiciled with PFCs as provided for in Section 56 of the pension act.
PenCom mandated all life insurance companies currently providing life annuity for retirees under the Contributory Pension Scheme (CPS) to open an operational account jointly with a PFC of their choice and advice the commission.
It maintained that all life insurance companies currently providing retiree life annuity under the CPS should transfer the corresponding assets in their possession/custody to the PFC of their choice.
The commission also noted that the approval of new request for annuity should be put on hold with immediate effect, until life insurance companies meet the custody and transfer conditions.
It was a circular that unsettled insurance industry, as they were reluctant to release the fund to pension fund custodians, especially, at a time the industry is grappling with several challenges.
There are since been series of meetings between the two regulators, that is, NAICOM and PenCom to resolve the issue, although, no concrete conclusion has been made yet.
