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State Regulators Vote to Cut Minimum Annuity Rate in Model Law

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Members of the National Association of Insurance Commissioners (NAIC) voted Wednesday to lower the minimum nonforfeiture interest rate for individual deferred annuities to 0.15%, from 1%.

The minimum nonforfeiture rate is the lowest interest rate guarantee an insurer can use in an annuity contract to determine the annuity’s cash value.


  • Links to NAIC fall meeting documents are available here.
  • An earlier article about the NAIC’s nonforfeiture model update project is available here.

The NAIC is a Kansas City, Missouri-based group for state insurance regulators. Its members held the nonforfeiture rate vote during a session of their fall national meeting, which took place on-line due to the pandemic.

Life insurers asked the NAIC to lower the nonforfeiture rate this summer because of a dramatic drop in interest rates that occurred after the effects of the COVID-19 pandemic became apparent.

Interest rates are important to U.S. annuity issuers, because U.S. life insurers rely heavily on investments in corporate bonds to back annuity obligations and other long-lasting obligations. Annuity issuers count on being able to earn rates on their own investments that are higher than the rates they pay to annuity holders.

The NAIC changed the annuity nonforfeiture minimum by amending the Standard Nonforfeiture Law for Individual Deferred Annuities (Model Number 805).

The association cannot directly change a state’s laws, but many states start with NAIC models when writing their own laws and regulations.

The Life Actuarial Task Force, an arm of the NAIC’s Life Insurance and Annuities Committee, considered the idea of lowering the nonforfeiture rate floor to 0%, 0.25%, 0.35% and 0.5% as well as to 0.15%, according to a project history included in a fall meeting document packet.

Representatives from Missouri, New York and Oklahoma were skeptical about the need for a significant reduction in the minimum nonforfeiture rate floor, according to the project history

Susan Neely, president of the American Council of Life Insurers, welcomed the NAIC vote on the nonforfeiture model update and said the vote will help keep individual deferred annuities viable.

“We hope that state legislatures will adopt the model in 2021 so that consumers can continue to access greater financial security for retirement with valuable tools from life insurers,” she said.

— Read ‘Stan the Annuity Man’ Sees Business Booming as Investors Seek Safetyon ThinkAdvisor.

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