A directive by the National Insurance Commission (NAICOM), compelling life insurance companies to meet specified solvency thresholds or drop their annuity portfolios is placing significant pressure on affected firms.

The move, which aims to safeguard retirees’ funds and strengthen industry stability, is already creating tension among operators whose business models have largely revolved around annuity and group life insurance.

Olusegun Omosehin, Commissioner for Insurance/ CEO, NAICOM said to continue to do annuity business in Nigeria, the insurer must have a minimum solvency ratio of 100 percent, otherwise the company would have to move the portfolio to another insurer that have the required capacity.

Omosehin said the commission is not concerned whether companies that do not have the required solvency level are dropping their portfolios. Rather, what is more important to the commission is that retirees’ funds in the insurance industry are protected.

“They must be managed by companies that have the required capacity to do so, and we have many of such companies in the market,” he said

The guidelines follow the fall of African Alliance Insurance annuity business, that made the company unable to meet its obligation, until its eventual take over by NAICOM. The annuity portfolio has been moved to Leadway Assurance Limited, and monthly payments to affected annuitants have since been restored.

LASACO Assurance also recently relinquished its annuity portfolio to Cornerstone Insurance Plc. NSIA Insurance, industry watchers say is also planning same.

The key regulatory driver of this shift is NAICOM’s 2025 circular titled “Additional Regulatory Requirements for Annuity Business in Nigeria,” issued January 2025 and effective from February 1, 2025, to all life insurance companies.

The circular introduced several core provisions. First, it mandates asset-liability matching (ALM), requiring each insurer to appoint a qualified actuary responsible for ensuring that assets are properly aligned with annuity cashflow obligations.

Second, it introduces quarterly ALM reporting, compelling insurers to submit detailed reports that include cashflow matching, duration gap analysis, and stress testing under scenarios such as ±300 basis points and ±600 basis points shocks.

Although the circular does not explicitly state a “100 percent solvency margin,” it effectively enforces an implied full coverage requirement. Insurers are required to continuously monitor the relationship between asset values and liabilities, take corrective actions where gaps exist, and rebalance portfolios to maintain full coverage at all times.

Benjamin Agili, managing director, AvanGarde Insurance Brokers Limited, said the annuity portfolio remains a very volatile risk that insurers must handle with care.

According to him, the regulator’s decision to monitor the asset-liability match for annuity risks is appropriate; otherwise, it could drag the image of the industry into the mud.

“Annuity and group life insurance are the juiciest parts of the life insurance business and account for about 70 percent of market share, while the less attractive retail segment takes the remaining balance.”

Tinubu arrives Lagos for Eid-el- Fitr celebrations

The brutal truth behind streaming in Nigeria

This means that annuity is key to the life insurance business and must be handled cautiously and professionally.

Ebelechukwu Nwachukwu, chairman, Sub-Committee on Communications and Public Relations of the Nigerian Insurers Committee, said NAICOM is particular about the solvency level of insurers handling annuity business in Nigeria.

“This is part of the commission’s effort to ensure that only players with the right capacity handle annuity business.”

Nwachukwu added that it is also part of the commission’s effort to ensure that retirees’ funds in the hands of insurers are adequately protected.

Omosehin during a recent media interaction with Journalists in Lagos emphasised the determination of the Commission to protect policyholders’ interest in the insurance industry.

He said NAICOM has begun work on establishing an Insurance Policyholders Protection Fund that will serve as a safety net to protect policyholders in the event that an insurance company becomes insolvent.

He noted that draft guidelines have already been issued and subjected to stakeholder consultation, while final work is ongoing on governance structures and the appointment of a fund manager.

“The fund will serve as a safety net to protect policyholders in the event that an insurance company becomes insolvent, and in such a situation, the fund will step in to settle valid claims of policyholders and later recover the funds from the assets of the failed company,” he said”.

Omosehin acknowledged that rebuilding public confidence remains one of the biggest challenges facing Nigeria’s insurance industry.

“At the heart of many challenges in the insurance sector today is a crisis of confidence. Addressing that confidence gap is one of the central goals of the ongoing reforms,” he said.

He emphasised that NAICOM remains committed to transparency, fairness and consistent regulation in order to attract investment and strengthen the industry. The journey has begun and there is no turning back from the reforms we have started,” he said.

An ongoing reform in the nation’s insurance industry following the signing into law of Nigerian Insurance Industry Reform Act (NIIRA) 2025, has given companies up to 30th July 2026 to increase their minimum capital requirement or lose their operating license.

In the new capital requirement, General Insurance companies’ capital was moved from initial N3 billion to N15 billion; Life insurance companies N2 billion to N10 billion; and N5 billion to N25 billion for Composite Insurance companies, that have also been given five years to split their businesses into life and general business; while reinsurers capital was moved from N10 billion to N35 billion.

Modestus Anaesoronye

Modestus Anaesoronye is a leading Nigerian financial journalist with over two decades of experience reporting on the insurance and pension sectors across Nigeria and West Africa. He has held key editorial positions at major national media outlets, including The Comet, The Nation, and Financial Standard, and currently serves as a Senior Financial Analyst at BusinessDay Media Ltd. A widely travelled reporter, he has covered industry developments in more than 14 countries across Africa and Asia. Anaesoronye is a multiple award-winning journalist, honoured several times as Insurance Journalist of the Year and Pension Journalist of the Year by recognised industry bodies, including PensionScope and the Pension Fund Operators Association of Nigeria (PenOp), among others.(BusinessDay)

Update news