Cove Insight: RBC Insurance Announces 2023 SRIA Guaranteed Interest Rate

The dramatic losses in the bond and equity markets have impacted life insurance policy interest rates for all smoothed-rate accounts. For RBC Insurance (RBCI) policies invested in the Smoothed Return Investment Account (SRIA), the guaranteed SRIA interest rate for 2023 is 3.0%, down from 4.1% in 2022. As a result, the CF loan rate for 2023 will decrease from 5.95 % to 5.05%.

The historical performance table below shows how RBCI successfully set an average annual policy rate of 4.53%, which is very close to the average annual return in the Reference Portfolio of 4.51% from 2014 through 2021.

The unprecedented 2022 market downturn in both bond and equity markets has resulted in a Reference Portfolio loss of 11.26% through August 31, 2022 year-end and brought down the average return since 2014 to 3.23%.

The 3.0% rate in 2023 is still a highly attractive guaranteed tax-exempt interest rate.

The SRIA performance will eventually increase alongside a recovery in the bond and equity markets.

For those clients that have used the SRIA value as leverage, the benefits of the strategy will be reduced in 2023. While this may not be a desired result, historical performance and future potential still make it a viable strategy and we encourage all clients to take a long-term view.

RBC Insurance SRIA Investment Account

The SRIA is an investment account option in certain RBCI Security Fund universal life insurance policies. Funds invested in the SRIA are managed on a discretionary basis by RBCI in an underlying portfolio (the “Reference Portfolio”). The investment objective is low volatility with a long-term focus targeting superior returns while minimizing risk of capital loss. Actual returns in the Reference Portfolio are smoothed into the policy interest rate through a guaranteed calendar year interest rate announced prior to each calendar year.

The historic performance of the SRIA is as follows:

As of August 31, 2022, the Reference Portfolio’s market value was $1.579 billion allocated as follows:

Reference Portfolio Asset Allocation

If you have questions, thoughts, or want to talk more about this topic with one of our advisors, you can book a meeting with us.