Insurance regulator, the National Insurance Commission (NAICOM) said the annuity portfolio managed by insurance companies has grown to N275 billion as at the end of 2018.
The annuity portfolio includes the annuity funds of individuals managed by insurers, as well as those from retirement savings accounts of retirees under the Contributory Pensions Scheme.
Sunday Thomas, deputy commissioner for insurance, Technical, said volume of annuity received by the insurance sector has dropped in 2018 because some life companies were weighing the volatility of the risks.
Statistics from the National Pension Commission (PenCom) show that it has approved a total of 2,831 applications for retirement under life annuity during the quarter ended November 2018, bringing the total number of retirees receiving their retirement benefits through the annuity plan to 57,302. The 2,831 retirees received N1.7 billion as lump sum payment and paid premium of N16.04 billion to insurance companies. This resulted in total lumps sum payment of N68.17 billion and monthly annuity payments of N3.00 billion.
Growing interest of retirees in taking up annuity for retirement benefits as provided in the Pension Reform Act 2014 has spiked monumental growth in life business of insurance companies.
This development which has led to increase in premium of life companies offering annuity has seen the industry life premium grow by 37 percent as at the end of 2014.
S. 7 (1a) Pension Reform Act 2014 states that an employee on retirement shall procure Annuity for Life Policy or Programmed Withdrawal.
The lump sum for the procurement of Annuity for Life Policy or Programmed withdrawal must have been accumulated through series of employer/employee contributions into the Retirement Savings Account of the retiring employee throughout his/her working career.
Annuity for Life Policy is a retirement instrument option for retiring employees, offered by a Life Insurance Company licensed by the National Insurance Commission (NAICOM).
Annuity for life as is popularly called, is a type of annuity contract that provides, in return for a lump sum, a monthly or quarterly payment starting immediately after retirement and continuing for the rest of the retiree’s life.
The contract is often purchased by retiring persons who want an income that is guaranteed to last for the rest of their lives, no matter how long that might be.
Analysts say this is likely to grow over time, given that a lot of the retirees under the Contributory Pension Scheme were beginning to be more aware of the benefits of annuity, but raises concern over the capacity of the market to absorb the size of the risk.
According to the African Insurance Barometer, launched recently by the African Insurance Organisation(AIO), individual annuity business is the fastest growing personal line business, particularly in the Sub-Sahara Africa including Nigeria.
While Sunday Thomas, director-general, Nigerian Insurers Association, confirms the rise in life business, he said the contribution of life portfolio to the market premium is on the increase, but called on more players to widen their nets.
According to him, the insurance industry in Nigeria presents a lot of growth opportunities due to the low insurance penetration. He further said that attention must be given more to the development of the retail market, while waiting for corporate accounts to rebound.
For a sustainable Nigerian insurance industry, the market must continue to enhance the way it is valued by the consumers and other stakeholders; step up its consumer education and public awareness of the vital importance of insurance as a social and economic transformation mechanism; keep developing innovative solutions required by consumers to manage risks in an increasingly complex and uncertain environment, Thomas said.
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