Kenyan insurers earn from pension savings while workers are still saving. Nigerian insurers wait for retirement

Guaranteed funds hold KSh597.07 billion ($4.63 billion) of Kenyan retirement money, close to a fifth of the industry, in contracts written by approved insurers Annuities accounted for 44.3% of Nigerian life premiums in the fourth quarter of 2025, about ₦322 billion ($223 million), which NAICOM attributes to retirees converting pension balances into guaranteed income Nigeria's policy rate has fallen from 27.5% to 26.5%, and NIIRA 2025 now sets capital at the higher of a fixed minimum or a risk-based calculation that includes charges for market risk Insurers in Kenya and Nigeria both earn money from pension savings. They gain access to it at opposite ends of a worker's life. Kenya's Retirement Benefits Authority reported guaranteed funds of KSh597.07 billion ($4.63 billion) at the end of June, the second-largest asset class after government securities and about a fifth of national pension assets. Kenyan regulations allow approved insurers to write these contracts. The insurer takes the investment risk, pays a minimum return and keeps the spread. Money entering a guaranteed fund becomes an insurance liability carrying an insurance margin during the accumulation phase, decades before the saver retires. Nigeria's channel opens at retirement. NAICOM's Q4 2025 bulletin put annuities at 44.3% of life premiums, roughly ₦322 billion ($223 million) of the ₦727.4 billion written in the quarter. The regulator attributed the share to retirees converting pension savings into guaranteed income. Individual life accounted for 36.2%, while group life contributed 19.5%. Life assets reached ₦2.1892 trillion out of total industry assets of ₦4.7916 trillion, up 7.4% from ₦4.4602 trillion in the previous quarter. The timing difference determines the size of each pool. Nigerian pension assets stood at ₦30.70 trillion in June, 6.4 times the insurance industry's end-2025 assets, although the two figures are six months apart and were converted at different exchange rates. Kenyan insurers have access to that pool throughout the accumulation period. Nigerian insurers access the annual flow of retirees. The rate cycle sets Nigerian insurers' income, not the pension bid The Central Bank of Nigeria held its policy rate at 27.5% into September 2025, cut it to 27%, then lowered it again to 26.5% in February 2026, where it has remained. Insurers bought fixed-income assets near the top of that cycle. As those instruments mature, they are reinvested at lower yields. The scale of that income has been overstated. Nairametrics reported ₦79.22 billion in investment results across 17 listed insurers in the first half, compared with ₦66.22 billion in insurance service results. Under IFRS 17, the two are not directly comparable contributions to profit. Insurance finance expenses, including the unwinding of discounts on insurance liabilities, fall outside the insurance service result and are not deducted from the investment line. AIICO's published accounts show the difference. Group investment results of ₦27.61 billion plus an insurance service result of ₦8.13 billion total ₦35.74 billion, compared with profit before tax of ₦15.05 billion. Roughly ₦20.7 billion is absorbed between the two by insurance finance expenses, operating costs and a ₦1.79 billion foreign exchange loss. Net investment income before fair value changes rose 43.8% to ₦40.14 billion, then faced a fair value loss of ₦10.41 billion. NIIRA 2025 prices the obvious response. Section 15 sets capital at the higher of a fixed minimum or a risk-based requirement. The fixed minimums are ₦10 billion for life, ₦15 billion for general insurance and ₦35 billion for reinsurance. The risk-based calculation includes charges for insurance, market, credit and operational risk. NAICOM applies a ₦25 billion minimum to composite insurers. An insurer replacing lost yield with greater equity or credit exposure increases its own capital requirement. NAICOM initially verified 43 companies as having met the recapitalization requirements. Their combined statutory minimum capital requirements totaled ₦715 billion. Seven more were later cleared, bringing the total to 50 insurers and reinsurers. The charge factors are contained in NAICOM's 2025 risk-based capital guidelines and have not been published in a form that allows the cost to be calculated. Pension funds used their new equity room; what they bought is unresolved PenCom raised equity limits on Feb. 9. Fund I's ceiling rose from 30% to 35%, Funds II and VI-Active from 25% to 33%, and Fund III from 10% to 15%. PenCom cited a shortage of qualifying alternative investments that had left liquidity idle. In June, Fund I held about 32.5% in ordinary shares, Fund II 29.6% and Fund III 13.7%. All three were above their pre-February ceilings. The industry-wide figure of 19.2% understates this because it is diluted by retiree and closed-scheme funds with lower limits. Allocation percentages can also rise because of price movements. Pension equity holdings grew 49.4% between December and June, from ₦3.96 trillion to ₦5.90 trillion. The NGX All-Share Index had already gained 25.3% by Feb. 20. A fund sitting at its 25% ceiling in that market can move above the limit without buying additional shares. On that reading, the February addendum may have removed forced sellers rather than added buyers. That interpretation is consistent with PenCom's own language about bottlenecks and excess liquidity. Distinguishing between the two would require December and January allocations by fund. The scarcity argument has been challenged. In late August, African Arguments said African pension regulators had already granted investment headroom that remained unused. It cited Ghana, where allocations to alternatives stood at 0.58% against a 25% ceiling. Both can be true: Nigerian funds used their increased listed-equity limits while making little use of private assets. The direction of travel also matters. Nigerian pension assets fell ₦623.6 billion, or 2%, from a record ₦31.32 trillion in May after equities corrected. Federal government securities remain at ₦17.40 trillion, or 56.7% of the portfolio. At the same time, PenCom has been reducing allowable exposure to government securities and raising equity limits. The Dangote refinery listing, for which PenCom granted a one-time eligibility waiver in May, is the second half's largest scheduled capital-market event. It will show whether pension money funds new issuance or rotates within existing holdings.