Prescribed U.S. statutory and tax interest rates for the valuation of life insurance and annuity products

September 19, 2016
Prescribed U.S. statutory and tax interest rates for the valuation of life insurance and annuity products

by Lori Helge

Willis Towers Watson's 2016 summary of prescribed U.S. statutory valuation interest rates for life insurance and annuity products is now available. Insurance companies use these interest rates to calculate minimum U.S. statutory reserves, minimum life policy nonforfeiture values and tax reserves.

This report provides the updated maximum statutory valuation and nonforfeiture interest rates for calendar-year 2016 issues of life insurance products, as well as the maximum statutory valuation interest rates for calendar-year 2016 issues of annuity products. It also provides the Applicable Federal Rate used in the calculation of tax reserves for 2016 issues.

Key results

Interest rates remained steady from July 2015 until December 2015. Starting January 2016, interest rates decreased steadily and significantly through July 2016.

Highlights:

  • The maximum statutory valuation interest rate for calendar year 2017 issues of whole life insurance products remained level at 3.50%.
  • The maximum statutory valuation interest rate for calendar year 2016 issues of single premium immediate annuities remained level at 4.00%.
  • The maximum statutory valuation interest rates for calendar year 2016 issues of other annuities and guaranteed interest contracts remained level or increased up to 25 basis points (varying by annuity plan type and guarantee duration).
  • The Applicable Federal Interest Rate for 2016 remained below the prevailing maximum statutory valuation rates and even below 2%. The greater of these two interest rates should be used for the computation of tax-basis reserves for 2016 issues of most life and annuity products.

For comments or questions, call or email
Lori Helge at +1 312 401 7355, or
lori.helge@willistowerswatson.com.