AMIS sees resolution in annuity dispute by year-end

Mexico's insurance association AMIS expects to reach an agreement with social security agency, the IMSS, in a dispute over annuity fund transfers before the end of the year, AMIS chairman Jose Luis Llamosas Portilla told press on Monday. "We along with the IMSS and finance ministry are reviewing the system and hope before the end of the year to have conclusion," Llamosas said. "Annuity companies would like this process to move more quickly, but they understand the situation and are also participating in the work groups." Representatives from the AMIS, finance ministry and the IMSS have been in talks since early May. AMIS wants the IMSS to automatically provide its contributors with a comparison of their pension or disability/invalidity payments under the state and private systems; to inform contributors of additional benefits offered by insurers; and to adopt a single document for the transfer of funds from the agency to insurers. IMSS officials could not be reached for comment. Insurers currently manage annuity funds on behalf of some 130,000 people and have invested 4bn-5bn pesos ((US$365mn-457mn) in this line of business since 1997. Under the pension reform law of 1997, workers who contributed to the IMSS can opt at retirement or in the case of special circumstances - invalidity, disability or death - to keep their funds with the agency or transfer them to annuities. Insurers currently manage annuities on behalf of former IMSS contributors who fall into the latter three categories. Insurers saw annuity premiums jump from 250mn pesos (US$23.4mn) in the second half of 1997 to a peak of 15bn pesos end-2001. However, from May last year the IMSS started hindering the transfer of funds to insurers in order to shore up its ailing finances. As a result insurers saw annuity inflows drop 76.5% to 778mn pesos in the first quarter this year compared to the same period last year. "The IMSS is more cautious when it comes to giving an invalidity (pensions). Before when invalidity (pensions) were given more frequently our country had a higher invalidity pension rate than other countries. These are cases that are removed from the pension system," he said. Asked if the 12 insurers currently offering annuities would stay in business until the talks are concluded, Llamosas said: "They continue administrating their funds, have revenues, and have taken restructuring steps to survive this storm." Industry observers believe the dispute could force consolidation among annuity providers because of the small size of the market.