Insurance, Pension Regulators Warn Against Dealing With Defaulting Employers

Regulators in the insurance and pension sectors, under the auspices of the National Pension Commission (PenCom) and the National Insurance Commission (NAICOM), have compelled insurance companies and their vendors to fully comply with Nigeria’s pension and insurance laws.

The new directive, contained in a Joint Circular signed by the director of the Surveillance Department at PenCom, Abdulrahaman Muhammad Saleem and the director of Legal, Enforcement and Market Development, NAICOM, Dr Talmiz Usman, seeks to strengthen compliance with the Pension Reform Act (PRA) 2014 and the Nigerian Insurance Industry Reform Act (NIIRA) 2025.

The circular focuses on compliance with the Contributory Pension Scheme (CPS) and the requirement for all employers to maintain Group Life Assurance (GLA) coverage for their employees.

Under Section 2 of the PRA 2014, every employer in the public and private sectors is required to participate in the CPS, remit pension deductions within seven working days after salary payment, and provide life insurance coverage for employees.

However, despite continuous engagements, audits, and sanctions by PenCom, a significant number of employers, including some within the financial services industry, have remained in breach of these legal obligations.

PenCom revealed that it has appointed Recovery Agents to audit defaulting employers, impose administrative sanctions, and pursue judicial recovery of outstanding pension contributions and penalties.

Yet, the persistence of non-compliance has continued to threaten the sustainability and credibility of the CPS, prompting this joint enforcement strategy with NAICOM.

By this new circular, going forward, all Licensed Insurance Companies (LICs) must possess valid Pension Clearance Certificates (PCCs) from PenCom and Group Life Assurance Certificates compliant with NIIRA 2025 before engaging in any operational or investment activity. Every vendor, service provider, and counterparty that seeks to do business with insurance companies must also hold valid PCCs and GLA Certificates as a precondition for any contractual agreement.

The directive further extends to investment transactions, including commercial papers, bond issuances, and bank placements. All counterparties involved must execute a Compliance Attestation, affirming that their own vendors and service providers also maintain valid PCCs and GLA Certificates.

According to the jointly made statement, “This cascading requirement effectively embeds pension and insurance compliance throughout the investment value chain, ensuring that no entity within the insurance ecosystem operates outside the law.

“Insurance firms are also required to integrate these compliance requirements into their internal policies, vendor selection, due diligence, and investment risk assessment frameworks. Similarly, parent companies, subsidiaries, holding firms, and institutional shareholders of insurance entities must demonstrate full compliance before any business dealings are approved.”