Current industry practice is for funds to insure their risk benefits and impose unspecified benefit limitations, restrictions, and exclusions as set out in the insurance policy but these are not reflected in the fund's rules. This practice has evolved as a matter of necessity, as Namibian retirement funds are all defined contribution funds and are too small to self-insure any of their risks. The GIPF is the only exception, self-insuring its risk benefits, and still being a defined benefit fund.

This question goes to the heart of how FIMA intends retirement fund rules to operate.

Having considered the Act, the Standards and the NAMFISA Rules Guidelines, I do not see an outright prohibition, but I do see a significant governance issue.

In short, I conclude that a fund may insure its risk benefits (death, disability, funeral, etc.). In fact, the Standards expressly contemplate this.

The definition of "insured benefit" is:

"a death, disability or funeral benefit or any other contingent benefit which does not form part of the retirement benefit, for which the fund holds an insurance policy."

So FIMA clearly contemplates insured risk benefits.

The question is whether the benefit limitations, exclusions and underwriting conditions may exist solely in the insurance policy and not in the fund's rules.

The NAMFISA Rules Guidelines require that the rules must state:
• "the nature and extent of benefits offered by the Fund"; and
• "all benefits granted by the Fund."

The Guidelines further refer specifically to:
• benefits payable on disability;
• benefits payable on death before retirement;
• benefits payable on death after retirement; and
• other benefits applicable to the fund.

The Rules Standard (RF.S.5.4) similarly requires the rules to contain the nature and extent of the benefits granted by the fund.

What concerns me is if the rules simply say:
"A member shall receive the insured disability benefit."
but the insurance policy contains:
• a 24-month mental illness limitation;
• HIV exclusions;
• hazardous occupation exclusions;
• pre-existing condition exclusions;
• maximum entry ages;
• waiting periods;
• underwriting loadings; and
• termination of cover during unpaid leave,
but none of those limitations appears in the rules.

In that case, the member's actual entitlement is determined by a contract between the fund and the insurer, not by the rules. That creates a potential conflict with section 273.

Section 273 provides that the rules are binding on the fund, its members, employers and other persons claiming through them. If the rules confer an apparently unrestricted disability benefit, while the insurance policy substantially limits it, one can legitimately ask: What are the member's contractual rights under the rules?

It is unclear whether FIMA requires reproducing every exclusion. At the same time, I do not think Parliament intended a retirement fund's rules to become a 250-page insurance policy.
That would be impractical.

I think a better interpretation is that the rules should state something along these lines:

"The Fund may provide insured death and disability benefits. The amount, terms, conditions, underwriting requirements, exclusions and limitations applicable to such insured benefits shall be those contained in the policy of insurance effected by the Fund from time to time, provided that the Board shall ensure that such policy is available for inspection by members upon request. Or, better still, distribute a schedule reflecting all relevant information to members once a year."

That achieves several things:
• the rules establish the legal entitlement;
• the rules expressly incorporate the insurance policy;
• members are informed that cover is subject to policy conditions;
• there is no inconsistency between the rules and the insurance contract.

I actually think the industry may have a latent compliance issue. I have seen over the years that many fund rules simply state:
"The disability benefit shall be the insured amount."
and say nothing more.

If that is all the rules provide, while the insurer's policy contains dozens of exclusions, there is an argument that the rules do not adequately describe the "nature and extent" of the benefits, as required by RF.S.5.4.

I suspect NAMFISA has tolerated this because it has been longstanding industry practice inherited from the Pension Funds Act. However, the FIMA places much greater emphasis on clear, comprehensive and transparent fund rules.

My recommendation is that rules should go further than current industry practice. I would include a dedicated clause stating that:

all insured risk benefits are provided subject to the terms of the insurance policy;
the board may replace or amend the policy from time to time without amending the rules, provided the nature of the benefit is not fundamentally altered;
members are entitled to inspect or obtain a copy of the applicable policy wording; and
where there is any inconsistency between the rules and the policy, the rules prevail as to the existence and amount of the benefit, while the policy governs the underwriting, claims assessment, exclusions and conditions of insurance.

That approach is legally more robust than the clauses in many current Namibian retirement fund rules and is more consistent with FIMA's transparency objectives.