The Retiree Life Annuity (RLA) has increased to N463 billion in Q2 2020. This represents a 15.34% marginal increase compared with the same period last year.
This is according to the quarterly RLA publication of the National Insurance Commission (NAICOM).
READ: Why NEM Insurance Plc is considering increasing its issued share capital
- The RLA portfolio has so far recorded 83,917 contracts purchased for a total premium of N376.6 billion as at end of 2020 Q2. This depicts 2.69% and 1.58% growth in count and volume, respectively in 2020 Q2 from end of 2020 Q1.
- The Industry fund portfolio grew by 15.34% from N401.5 billion to N463.1 at the end of 2020 Q2.
- The YoY growth for RLA business during the last three years averaged 25.45% in volume, while RLA fund portfolio growth has averaged 37.22%, notwithstanding the RLA payouts made (cumulative total payments of N167.2 billion as at end of 2020 Q2).
(READ MORE:Â Lagos 2021 Appropriation Bill scales through second reading)
From the graph above it is clear that irrespective of the cumulative annuity payouts, fund balance (N463.1 billion) still exceeds the sum of cumulative premium amounts received (N376.6 billion). Indicating the growth in the RLA business and a positive future outlook for the business in Nigeria.
READ: CHI gets NAICOM’s nod on micro life assurance Â
Further analysis of the periodical increments in the cumulative premium amounts received and RLA fund portfolio respectively, depicts the growth rate for premium receipts is receding, while the growth rate for the portfolio fund balance is volatile. This could be attributed to the volatility in interest rate.
READ: Konga CEO targets $10 million daily turnover by 2024
What this means
The performance generally mirrors the contribution of RLA to the insurance sector. This strength is confirmed by the fact that the net premium balance is only 45.21% of fund balance, indicating the strength of RLA portfolio to the sector. Also, the difference in fund balance (N253.7 billion) relative to net premium balance is an indication that annuitant can be rest assured that, all things being equal, they are guaranteed payout when needed.
READ: How to build a profitable Mutual Fund Portfolio
What you should know
The RLA is a financial product that features a predetermined periodic payout amount until the death of the annuitant. An annuitant typically pays into the annuity on a periodic basis when they are still working.
Annuitants may also buy the annuity product in one large, lump-sum purchase, usually at retirement. RLA is commonly used to provide guaranteed and/or supplemental retirement income that cannot be outlived.
(READ MORE:Â Verod Capital to acquire Law Union & Rock Insurance)
Retiree Life Annuity can be purchased from a Life Insurance Company licensed by the NAICOM and authorized to sell RLA under the regulation on retiree life annuity.
The NAICOM was established in 1997 by the National Insurance Commission Act 1997 with responsibility for ensuring the effective administration, supervision, regulation, and control of insurance business in Nigeria and protection of insurance policyholders, beneficiaries, and third parties to insurance contracts.
This is a great news. I hope Nigeria will capitalize on this and take up a plan appropriately