Market Value Adjustment
What Does Market Value Adjustment Mean?
A market value adjustment (MVA) refers to the increase or decrease in the value of assets held by an insurance company. These fluctuations in value can be passed on to clients to provide annuities with more customized features.
Policyholders who choose to surrender their annuity before the end of the guarantee period receive an adjustment. The actual contract value they receive can be either positively or negatively affected by current market conditions.
Insuranceopedia Explains Market Value Adjustment
A market value adjustment (MVA) applies to a deferred annuity with a fixed interest rate and is made in response to market conditions.
The MVA only affects withdrawals that exceed the free withdrawal provision specified in the contract during the surrender charge period. Most annuities allow free withdrawals of up to 10% of the accumulation value or the interest earned on the contract. If interest rates are higher at the time of withdrawal than when the contract was purchased, a negative MVA will be applied. Conversely, if interest rates are lower at the time of withdrawal compared to when the contract was purchased, a positive MVA will be applied.
