Market Value Adjustment
What Does Market Value Adjustment Mean?
A market value adjustment (MVA) is an increase or decrease in the value of the assets held by an insurance company. This fluctuations in value can be passed on to clients in order to create an annuity to offer more localized features.
Policyholders who want to surrender their annuity prior to the end of the guarantee period receive an adjustment. The actual contract value they receive can be positively or negatively affected by current market conditions.
Insuranceopedia Explains Market Value Adjustment
A market value adjustment accompanies a deferred annuity that has a fixed interest rate. The adjustments are done in response to market conditions.
An MVA will only apply to the amount that the insured withdraws in excess of the free withdrawal provision stated within the contract during the surrender charge period. The majority of annuities allow free withdrawals of up to 10% of the accumulation value or the interest earned in the contract. Interest rates that are higher at the time of withdrawal in comparison to when the contract was purchased will have a negative MVA applied. If interest rates are lower at the time of withdrawal in comparison to at the purchase of the contract, a positive MVA will apply.
