August Update: Valuation Interest Rate Changes for Life and Annuities

Status: The 2026 Valuation Rate determination window opened July 1, and it will determine the Annuity Valuation Rates for 2026 and the Life Reserve and Nonforfeiture Rates for 2027. The Annuity Valuation Rates for 2025 and the Life Reserve and Nonforfeiture Rates for 2026 are now final, and are discussed further, below.

The Moody's Corporate Average Yield Rate (MCAYR) for July 2025 is 5.81% -- a drop of 4 bp from June’s rate; this is still 71 bp higher than the low over the last year (5.10%) recorded last September. Recent daily entries have dropped further, however (estimated to be 5.70% as of August 6).

Life Valuation: The 2026 Life Reserve Rate remains unchanged at 3.50% and the Life Nonforfeiture Rate remains 4.50%. Note, however current trends suggest these discounting rates will likely increase for 2027.

The critical threshold to trigger a further rise in the valuation rates is 5.51%—for if the lower of the 12-month and 36-month averages of the MCAYR as of the end of the current valuation rate window (June 2026) is at or above this value, a change will be effective for 2027 issues. To trigger a fall in the valuation rates, the lower of these averages would need to be at or below 3.35%--which is extremely unlikely at this time.

As of July 2025, the 36-month average (A36) is 5.47%, lagging behind the 12-month average (A12) at 5.61%.

Note A12 is already above the trigger point, and we expect A36 to continue to rise, based on the fact “new” rates coming into the 36-month span will be higher than those of older months “falling off.”

Specifically, for there to be a rise (in 2027) to the Life Reserve rate of 4.0% (and Nonforfeiture Rate of 5.0%), the MCAYR would need to average only 5.478% over the next 11 months (August 2025-June 2026), as A12 in June 2026 would be 5.51% (and A36 would be higher).

Given that the current daily MCAYR is in the 5.6-5.8% range, unless rates fall dramatically over the coming months, we anticipate the certainty of another valuation rate change to be known perhaps by January (2026). Companies should continue to monitor these trends as they emerge.

Comments regarding potential future 7702/7702A rate changes: Our reading of the present regulations is that the rates related to the CVAT, guideline level premiums and guideline single premiums (7702) and 7-pay premiums (7702A) can only change in a year following a Valuation Rate change (i.e., 2026 for the present landscape). However, even then, the Insurance Interest Rate (IIR), instituted by S. 7702(f)(11)(A) and which now drives these rates, has reset them to their current levels (4% for the GSP, 2% for the others)—so these rates should remain the same as related to the current valuation rate change.

Of note, however, should another valuation rate change (e.g. increase) occur in 2027, we should expect to see these rates rise (in the following year, 2028), set to be 1% higher –that is, 5% for the GSP, 3% for the others. This would mean the dollar limits for guidelines would decrease/fall versus current (i.e., pre-2028).

Please see the attached chart, reflecting our interpretation of the applicable regulations. We will continue to monitor these trends and provide updates as relevant information is available.

Immediate Annuities: With the introduction of VM-22, which governs the valuation of income annuities effective January 1, 2018, the timing and determination of valuation rates has changed dramatically. This change impacts all life insurers.

Specifically, valuation rates for all "non-jumbo" contracts (i.e., those with an initial deposit less than $250 M) now vary by period certain length and, if life contingent, issue age. Furthermore, these rates will vary by quarter (as opposed to year) of issue, and are based on a moving average of U.S. Treasury rates, current market credit risk additions, and current average market credit loss charges.

Rates are published quarterly by the NAIC, and, for contracts issued during the third quarter of 2025 (i.e., between July 1 and September 30, 2025), the rates are as follows:

Issue Ages:	0-69	70-79	80-89	90+	Non-Life
Period Certain less than or equal to 5 Years:	5.25%	5.00%	4.75%	4.50%	4.50%
Period Certain greater than 5 but less than or equal to 10 Years:	5.25%	5.00%	4.75%	4.75%	4.75%
Period Certain greater than 10 but less than or equal to 15 Years:	5.25%	5.00%	5.00%	5.00%	5.00%
Period Certain greater than 15 Years:	5.25%	5.25%	5.25%	5.25%	5.25%

Versus Q2, Q3 valuation rates barely moved, with only the “D” rate increasing, by 25 bp, affecting issues to ages < 70, or longer (> 15 year) terms. At present, however, Q4-2025 rates are on track be potentially 25 bp lower, due to Q3-daily rate trends. Companies should continue to monitor these rates, particularly if they wish to avoid crediting at a level close to or above the valuation rate.

For a full listing of “Non-Jumbo” Valuation Rates since 2018, please see links at bottom of page; we update these charts as new information is made available.

Valuation rates for “Jumbo” contracts (i.e., those with an initial deposit $250 M or greater) will vary by day of issue, and are available via the NAIC website here.

Deferred Annuities: 2025 Valuation rates for single premium and flexible premium product types are now final, with valuation rates between 3.75-5.25% (representing no change for durations 10 years or less, or increases of 25-50 bp for longer durations, versus 2024 rates). The rate changes will vary depending on Type (A, B, C), using an issue year basis.

While early, the analogous rates for 2026 issues are on track to rise by 0-25 bp (ranging between 4.0% and 5.5%).

The Five-Year CMT rate as of July is 3.95% -- this is down 1 bp from June’s rate. Daily rates, however, have been running about 5 basis points lower (~3.9%).

The minimum dynamic annuity crediting rate now resolves to 2.70% -- down 5 bp versus the prior month, but up 45 bp since September.

All of this means that companies which have language in annuity contracts with an affected/upcoming reset should be prepared for possible major contract impact/implications.

Here is a spectrum of possible guaranteed minimum rates, based on potential Five-Year CMT rates:

-- if the Five-Year CMT rate is 2.27% or lower, the Minimum Guarantee Rate is 1.00%;<-- this is where we had been prior to April 2022.

-- if the Five-Year CMT rate is 2.28% to 2.32%, the Minimum Guarantee Rate is 1.05%;

…

-- if the Five-Year CMT rate is 3.88% to 3.92%, the Minimum Guarantee Rate is 2.65%;

-- if the Five-Year CMT rate is 3.93% to 3.97%, the Minimum Guarantee Rate is 2.70%; <-- this is where we are currently.

-- if the Five-Year CMT rate is 3.98% to 4.02%, the Minimum Guarantee Rate is 2.75%;

… and so on.

Reminder: for most –but not all— plan designs, this minimum guaranteed crediting rate is typically capped at 3.00%, though companies should review/evaluate their contracts for deviations.

What this change means is that insurers offering dynamic minimum guarantee products should review their product guidelines, as well as how various eras of plan codes are set up/managed in their administration systems. We will keep our clients apprised of these changes and suggested actions as this trend evolves.

Please see our 2026 Valuation Rate profile for more details. A full, downloadable 2025 Valuation Rate profile is also available, as well our archive for prior years:

2024 - 2023 - 2022 - 2021 - 2020 - 2019 - 2018.

(Note: pop-up windows must be enabled to view interest rate profiles)

Griffith, Ballard & Company will continue to monitor and report on these rate trends, and what they mean for insurance companies and fraternal benefit societies. If you wish to discuss these and other issues in more detail, please contact our office.