The National Insurance Commission (NAICOM) has issued additional regulatory requirements for life insurance companies engaged in annuity business in Nigeria.
An annuity is a long-term investment agreement between an individual and an insurance company, which mandates the individual to make payments in series or a single payment at a particular time, in exchange for periodic disbursements or income — immediately or in the future — from the insurer.
The new directive, issued through a circular in Abuja on Friday, mandates insurance companies to have at least one qualified actuary responsible for assets-liability matching (ALM) analysis and implementation.
ALM is a strategy insurers use to align the duration and cash flows of their assets and liabilities, to help them manage risk and ensure they can meet future obligations.
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NAICOM said the insurance companies must submit ALM reports to the commission on a quarterly basis.
The commission said the reports must be submitted in accordance with the requirements outlined in the circular, which include specific actions that insurers must take based on the outcomes of detailed analyses, following the guidance set by the standards of actuarial practice (NSAP).
NAICOM also said insurance companies unable to meet the additional financial obligations imposed by the new regulations would be required to transfer their annuity portfolios to another suitable insurer within 180 days.
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The regulator said the directive, effective from February 1, is designed to ensure the stability and security of the annuity business in Nigeria.
”Insurance companies are required to comply with the new requirements, with the Board of Directors responsible for ensuring strict compliance,” the circular said.
NAICOM added that the directive is aimed at enforcing best practices in annuity portfolio management, thereby fostering a safe, sound, and stable insurance sector in the country.
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