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Prescribed U.S. Statutory and Tax Interest Rates for the Valuation of Life Insurance and Annuity Products (2019)

Insurance Consulting and Technology|Reinsurance
Insurer Solutions

By Lori Helge | October 29, 2019

Annually, Willis Towers Watson publishes a summary of prescribed U.S. valuation interest rates for life insurance and annuity products. These interest rates are used in determining minimum U.S. statutory reserves, minimum life policy nonforfeiture values and tax reserves.

This report updates the maximum statutory valuation and nonforfeiture interest rates for calendar-year 2020 issues of life insurance products and the maximum statutory valuation interest rates for calendar-year 2019 issues of annuity products. VM-22 was adopted with an effective date of January 1, 2018, and prescribes the interest rates to be used when valuing single premium immediate annuities and other similar contracts or supplementary contracts.

The Tax Cuts and Jobs Act of 2017 amends the requirements of reserves calculated under Section 807(d) for taxable years beginning after December 31, 2017. Section 13517 of the act no longer requires reserves to be computed using the greater of the Applicable Federal Interest Rate and the prevailing state assumed interest rate. Section 807(d) as amended requires the use of the rate used for statutory reserving, as life insurance reserves for taxable years beginning after December 31, 2017, are determined, in part, based on the reserve computed as required by the National Association of Insurance Commissioners (NAIC) at the time the reserve is determined. We will no longer update the Applicable Federal Interest Rate due to this change.

Key results

Interest rates generally increased to a peak in October 2018, followed by a steady decline that continued through June 2019.

Highlights include:

  • The maximum statutory valuation interest rate for calendar-year 2020 issues of whole life insurance products (i.e., life insurance products with guarantee duration of more than 20 years) remained level at 3.50%.
  • The maximum statutory valuation interest rates for calendar-year 2019 issues of other annuities and guaranteed interest contracts either remained level or increased by 25 basis points.
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2019 Prescribed US Valuation Interest Rate Report PDF 1.2 MB
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