Retirees may have abandoned the Retiree Life Annuity, RLA, pension payment plan following the crisis that hit the segment last year.

RLA is a stream of monthly or quarterly pension payments to a retiree who opted for the plan through an approved Life Assurance Company.

Financial Vanguard learnt that most retirees that had opted for the plan through African Alliance Insurance Company Plc. are yet to receive their payments following the technical insolvency it declared last year.

Consequently, the entire insurance sector is now suffering erosion of confidence in RLA scheme.

Financial Vanguard findings show that the number of retirees that opted for RLA in 2024 fell by 75.7 per cent to 13,974 from 57,486 recorded in 2023.

Industry performance details indicated that the scheme had enjoyed steady patronage before now with the 2023 performance showing that retirees opting for RLA increased by 368.9 per cent to 57,486 from 12,259 recorded in 2022.

Also the crises of confidence have affected the value of premium transferred to insurance companies for the purchase of RLA. The value declined by 54.04 per cent to N52.06 billion in 2024 from N113.27 billion transferred in 2023.

This performance indicator has been in upwards movement until the 2024 crises. In 2023 the value of premium transferred to insurance companies went up by 24.2 per cent to N113.27 billion from N91.23 billion recorded in 2022.

Industry operators said the declines have continued into 2025 indicating that RLA performance would be further down at the end of this year.

Insurance and pension experts are of the opinion that the apathy for RLA which led to the huge decline in 2024 is directly connected to the crisis which rocked the annuity market where African Alliance Insurance could no longer pay annuitants, thereby forcing the National Insurance Commission to sack the management of the company and appointed an interim management.

Although, the interim management has been able to pay two months out of the outstanding annuity payment, experts noted that the crisis has instilled fear into prospective retirees as the existing annuitants have continued to recount the ordeal they have been going through.

But the experts also noted that the absence of an insurance pool that should serve as back-up in settling policyholders in the event of a company going distressed also contributed to the apathy for RLA.

They, therefore, called on NAICOM to institute a structure like the Nigeria Deposit Insurance Corporation, NDIC, where an insurance pool of funds will be domiciled and funds can be drawn from there to settle policyholders in the event of a company going under.

It will be recalled that due to the annuity crisis, NAICOM recently released a circular outlining additional regulatory requirements for life insurance companies carrying on annuity business in Nigeria.

The circular, dated January 24, 2025, aims to enshrine best practice in the management of annuity portfolios by insurance institutions in furtherance to ensuring a safe, sound, and stable insurance sector.

Some key requirements of the circular include: Qualified Actuary: Insurance companies are required to have at least one qualified actuary responsible for Assets-Liability Matching (ALM) analysis and implementation; ALM Reports: Companies are required to submit ALM reports to the Commission quarterly, with requirements outlined in the circular such as required actions by insurers depending on the results from specific analysis applying guidance provided in the NAS Standards of Actuarial Practice (NSAP); Regulatory Compliance: Insurance companies are required to comply with the new requirements, with the Board of Directors responsible for ensuring strict compliance.

Others are: Transfer of Annuity Portfolio: Companies that are unable to cover the additional expenses imposed by the circular are required to transfer their annuity portfolio to another suitable insurance company within 180 days; Effective Date: the circular takes effect on February 1, 2025. Insurance companies are expected to comply with the new requirements to ensure a stable and secure annuity business in Nigeria.

Stakeholders, victims speak

Speaking on the RLS crises, Executive Secretary of the Nigerian Council of Registered Insurance Brokers, NCRIB, Mr. Tope Adaramola, said that there is need to create a pool that will cater for policyholders in the event of a company going distressed.

Adaramola said: “It is just like what the banking sector does with the Nigeria Deposit Insurance Corporation, NDIC, to enable the insurance industry to at least temporarily cushion the effects on the insured in the event of the death of any insurance company.

“So having such a backup would help to enhance the image of the industry and also reduce the suffering that those who are hemmed in the problem of a company closing down or the company having issues or being distressed without claims being paid.”

Adaramola stressed that NAICOM is ready to change the narrative but is being constrained by legislative hurdles.

He added: “NAICOM Is very concerned and has expressed worry about the development but it is not something that they can do on the tap of the finger. There must be the required legal backing for that to come on stream. So I think that it is an area that the entire industry should be looking at.”

Speaking on the plights of annuitants, one of the annuitants, Mr. Vincent Okoro, said that life has not been easy for them as they have been without any source of income for months, adding that some of their colleagues have died while awaiting the benefits.

He Implored NAICOM to use its regulatory power to assist them.

He also suggested that to stem similar occurrence in the future, the government should set up a body like NDIC to manage affairs of policyholders of failed insurance companies.

Also speaking, Batari Musa, an insurance stakeholder stated that due to the hard economic situation in the country, the affected annuitants are facing a lot of challenges, ranging from inadequate feeding, medical issues, their children being sent back from their schools for not paying school fees to accumulated debts.

According to him, under such condition, the interim management at African Alliance should clear the backlog of the unpaid annuity if they do not want annuitants dead.

He queried: “What is NAICOM doing to the former management and board who created this problem. Is sacking them the only punishment for the problem they created?”(Vanguard)