The National Pension Commission (PenCom) has mandated all Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) to procure a fidelity insurance policy to cover a minimum of two per cent of shareholders’ fund as annual insurance cover for their employees.
PenCom stated this in a circular, referenced, PENCOM/INSP/CIR/SURV/19/167, entitled: Implementation of the Requirement for the Provision of Fidelity Insurance Cover for Employees of PFAs/PFCs, dated, June 18, 2018, signed by the Head, Surveillance Department, PenCom, Ehimeme Ohioma and sent to all pension fund administrators and custodians.
PenCom noted that Section 69 (F) of the Pension Reform Act PRA 2014 mandates PFAs and PFCs to provide annual fidelity insurance cover for all staff to the full value of the pension funds and assets managed or held by them or as may be determined by the commission.
The pension industry regulator maintained that the fidelity insurance cover will protect the pension funds and assets from risks associated with actions or inactions of employees of PFAs and PFCs like dishonesty; negligence; fraud; forgeries and other fraudulent acts that may result in fraudulent losses.
The commission stated that it is aware that based on the current value of the assets under management and custody in the industry, providing fidelity insurance cover up to the full value of pension assets would have astronomical costs implications to the pension operators.
PenCom said it takes cognizance of the subsisting guarantees provided by the parent companies of the PFCs for the full value of pension funds and assets held in custody on behalf of the Retirement Saving Account (RSA) holders or their beneficiaries.
“In view of the foregoing, the commission has leveraged on the discretionary powers granted it by Section 69 (F) of the PRA 2014 with regards to the determination of an appropriate level of cover and has therefore, made the fidelity insurance cover to be a percentage of the shareholders’ fund of PFAs and PFCs. According to the pension industry regulator, the circular is effective as at the date it was issued.