NAICOM bars life insurers with negative cash flow from underwriting new annuity policy
A Life Insurance Company shall not be permitted to underwrite a new policy until it produces satisfactory evidence of having corrected negative cash flow positions or injected the required mismatch capital, National Insurance Commission (NAICOM) has warned.
NAICOM disclosed in its recently released Prudential Guidelines for Insurance Institutions in Nigeria, adding that under the liability adequacy test, a life insurance company shall by its in-house or external actuary carry out a liability adequacy test of its annuity portfolio on a quarterly basis to show the net cash flows of its projected assets and liabilities which shall include the duration and convexity of the assets and liabilities and an estimate movement in the net cashflow for deviations in yields, mortality/longevity risks,
NAICOM noted that life insurance company shall be required to correct negative cash flow positions and submit evidence of such within 30 days otherwise the company shall be required to hold capital equal to the negative cash flows as a mismatch capital to make up for the negative cash flow position in addition to the minimum regulatory capital.
By Chuks Udo Okonta