Shape 1 · ratio and compounding
[(1 + I) ÷ (1 + J + K)]N − 1
This shape compounds the difference over the time remaining. A filed Voya formula uses the same ratio-power structure; a Pruco filing shows a 0.25% spread in the denominator.
Contract mechanics
Market Value Adjustments: What Rates Up and Rates Down Actually Do
A contract-first explanation of the two standard formula shapes, the inputs that change the result, and computed examples in both directions.
Research updated August 13, 2026
A market value adjustment can raise or lower the amount available when a contract owner withdraws, surrenders, or annuitizes at a time covered by the contract's MVA provision. In the usual relationship, rates up means the adjustment goes down; rates down means the adjustment goes up.
The NAIC consumer guide states that same directional relationship and cautions that every MVA calculation is different. The Interstate Insurance Product Regulation Commission standards require the contract to disclose the method, the conditions that trigger it, and how it works in both directions. NAIC buyer's guide · Insurance Compact standards
Computed illustration
If rates move 2 percentage points, what happens?
These examples apply the two sample formulas in Appendix A of the Insurance Compact's July 17, 2024 standards. Assumptions: $100,000 subject to the MVA, 4.00% initial rate, 0.25% spread, and three years remaining. They exclude surrender charges, taxes, contract floors, and caps.
Rates rise 2 points
Rates up → adjustment down
↓ -6.22%
Rates fall 2 points
Rates down → adjustment up
↑ 5.22%
Blue, left, and ↓ identify a negative adjustment. Amber, right, and ↑ identify a positive adjustment; color is not the only signal.
| Rate scenario | Ratio-power formula | Amount after MVA | Simple-interest formula | Amount after MVA |
|---|---|---|---|---|
| Rates rise 2 points | -6.22% | $93,781 | -6.75% | $93,250 |
| Rates fall 2 points | 5.22% | $105,223 | 5.25% | $105,250 |
The two standard formula shapes
The Insurance Compact lists these as sample acceptable formulas; it also permits other approved formulas. The MVA percentage is then applied as the contract specifies.
Shape 2 · rate difference and time
[I − (J + K)] × N
This linear shape multiplies the rate difference by the remaining duration. It gives a similar, but not identical, result to the ratio-power shape.
- I
- Initial guaranteed rate or the contract's starting reference-index value.
- J
- Current guaranteed rate or the current value of the disclosed reference index.
- K
- A formula spread. In the Compact's guaranteed-rate standard, it cannot exceed 0.25%; index-based examples set K to zero.
- N
- Days or months remaining in the MVA period, divided by 365 or 12.
Primary receipts: Insurance Compact Appendix A, Voya filed formula, and Pruco filed formula.
Five contract ingredients determine the real result
1. Formula
The contract or endorsement defines the calculation and the order in which it is applied relative to other charges and credits.
2. Reference index or rate
The input may be a public interest-rate index or, for some multi-year guaranteed annuities, the insurer’s current guaranteed rate for new money or renewal periods.
3. Spread
Some formulas add a stated amount to the current comparison rate. Even a small spread shifts both the sign threshold and the size of the adjustment.
4. Caps and floors
Contractual limits can restrict an upward or downward adjustment. The Compact requires paired dollar limits when an upward adjustment is limited, and nonforfeiture rules can impose a minimum value.
5. Exemptions
The contract identifies the transactions and windows where no MVA applies, and whether a waiver affects the MVA, the surrender charge, or both.
When an MVA does not apply
There is no universal exemption list. One SEC-filed contract excludes specified required distributions, a 30-day maturity window, death benefits, annuitization, and certain program transfers. Other filed contracts apply an MVA to transactions that readers might expect to be exempt. Read the actual form.
- At or within the contract's guaranteed benefit window
- Within a permitted free-withdrawal amount, if the MVA provision says so
- Death benefits or annuitization, if expressly exempt
- Required minimum distributions, if expressly exempt
- Nursing-home, terminal-illness, or other waivers, only if the MVA itself is waived
State variation is contract variation
Availability and terms can differ by state. One SEC-filed contract says an MVA is not imposed in nine named jurisdictions even though transfer restrictions still apply there. Another filing notes that a minimum interest rate can vary by state. This is why a national product brochure cannot replace the state-approved contract form and endorsement.
See the filed state-variation languageQuestions to answer from your contract
- What transaction triggers the MVA?
- Which formula and reference rate apply?
- What spread and time period are used?
- What caps, floors, or minimum values limit it?
- Which free withdrawals and waivers also waive the MVA?
- Which state-approved form and endorsement govern your contract?
See how published explanations handled the direction
We audited the currently visible Google results and documented one page that contradicts itself on the core rates-up/rates-down relationship.
Read the MVA accuracy audit