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Interest Rate Update

2015-Sep-03 - Christopher H. Hause

Statutory valuation interest rates for life insurance remain unchanged for 2016, with the "Whole Life" rate at 3.50%. Given the current economic environment, a move down seems more likely than a move up. It is clear that the 50 basis point tolerance for movements in the valuation rate is bringing welcome stability to the rates.

Annuity valuation interest rates generally ticked down 25-50 basis points after having ticked up in 2014. Annuity rates are more volatile as a rule due to the lower tolerance for movements in the rates.

The Deferred Annuity Minimum Nonforfeiture rates continue to be pegged at the 1% minimum. Given the 125 basis point spread built into the average five year treasury, a significant upward movement will need to take place before anything changes.

Tax interest rates continue to be immaterial and will be for the near future. If you are new to the business, you might wonder why there even is a tax interest rate for life and annuity reserves. It has been over ten years since there has been a material spread between the Whole Life rate and the Tax rate.

Please note that, since the states appear to be slow in posting interest rates on their sites, these have not been validated as yet. We are confident as always, but have encountered differences in the past due to rounding.