October Update: Valuation Interest Rate Changes for Life and Annuities

-> For a downloadable snapshot of the following information, please see our 2027 Valuation Rate profile.

Status: The Annuity Valuation Rates for 2026 and the Life Reserve and Nonforfeiture Rates for 2027 are now final. Annuity rates remained the same or increased by at most 25-basis points versus 2025; life valuation rates and nonforfeiture rates both increased for 2027 issues.

The 2027 Valuation Rate determination window is now open; the twelve months from July 1, 2026 to June 30, 2027 will determine the Annuity Valuation Rates for 2027 and the Life Reserve and Nonforfeiture Rates for 2028.

The Moody's Corporate Average Yield Rate (MCAYR) for September 2026 is 6.25% -- this is a jump of 16 basis points versus August’s rate, mirroring the rise of other market rates over that span. This is the highest this rate has been since June 2009 (6.52%), however recent daily entries are trending beyond that threshold (resolve to ~ 6.56%).

Life Valuation: The 2027 Life Reserve RateLife Reserve Rate will be 4.00%%, and the Life Nonforfeiture Rate will be 5.00%; both of these rates are 0.50% higher than the past two years.

It is likely that this pairing of rates will be in place for the foreseeable future, as further changes (up or down) will require a significant and persistent movement of the MCAYR.

Specifically, given current rate trends seen so far:

-> for the Valuation and Nonforfeiture rates to increase in 2028 (to 4.5% and 5.75%, respectively), this would require the average MCAYR to be in excess of 10.66% for the 9 months from October 2026 to June 2027.

-> for the Valuation and Nonforfeiture rates to increase in 2029 (to 4.5% and 5.75%, respectively), this would require the average MCAYR to be in excess of 7.77% for the 21 months from October 2026 to June 2028.

-> for the Valuation and Nonforfeiture rates to increase in 2030 (to 4.5% and 5.75%, respectively), this would require the average MCAYR to be in excess of 7.00% for the 33 months from October 2026 to June 2029.

Note: while this horizon is still somewhat distant, it is worth watching the trends of the rates over the next 12 months especially.

-> for the Valuation and Nonforfeiture rates to decrease in 2028 (to 3.5% and 4.5%, respectively – i.e., “back” to levels of 2025-2026), this would require the average MCAYR to be below 4.35% for the 9 months from October 2026 to June 2027.

Given that the current daily MCAYR is in the 6.5-6.6% range (albeit rising), unless rates change dramatically over the coming months, another valuation rate change occurring before 2030 is currently unlikely.

Comments regarding upcoming 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., so in 2028, due to the 2027 Valuation Rate change).

The Insurance Interest Rate (IIR), instituted by S. 7702(f)(11)(A) and which drives these 7702/7702A rates, has not moved materially the over the past few years-- essentially keeping them at levels (4% for the GSP, 2% for the others) held since 2021.

This is about to change: subsequent to the valuation rate increase in 2027, we should expect to see the 7702/7702A rates rise (in the following year, 2028) to levels 1% higher than current—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 fourth quarter of 2026 (i.e., between October 1 and December 31, 2026), 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:	5.50%	5.25%	5.00%	4.75%	4.75%
Period Certain greater than 5 but less than or equal to 10 Years:	5.50%	5.25%	5.00%	5.00%	5.00%
Period Certain greater than 10 but less than or equal to 15 Years:	5.50%	5.25%	5.25%	5.25%	5.25%
Period Certain greater than 15 Years:	5.50%	5.50%	5.50%	5.50%	5.50%

These rates are now the highest they have been all year, and are 50 bp higher than Q4-2025. However, due to the dampening effects of the calculation formulae, these rates do not capture the dramatic rise seen over the last several weeks, with Q1-2027 rates on track already to be another 50 bp higher still—with some entries the highest they’ve been since the 2018 introduction of the current VM-V rate structure. 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: 2026 Valuation rates for single premium and flexible premium product types are now final, with valuation rates between 4.00-5.25% (representing at most 25 bp increases, versus 2025 rates). The rate changes will vary depending on Type (A, B, C), using an issue year basis.

At present levels, the Valuation rates for 2027 could be anywhere between 0-100 bp higher, though we note that this is a very early projection and much could change in the ensuing months. That said, already we are seeing the likelihood of some valuation rates here in excess of 6% for the first time since 2009.

The Five-Year CMT rate as of September is 4.80% -- this is up a notable 42 bp from August’s rate, though daily rates are up significantly even from this, currently ~5.0-5.1%.

The minimum dynamic annuity crediting rate resolves to 3.55% -- 40 bp higher versus the prior month.

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 4.73% to 4.77%, the Minimum Guarantee Rate is 3.50%;

-- if the Five-Year CMT rate is 4.78% to 4.82%, the Minimum Guarantee Rate is 3.55%; <-- this is where we are currently.

-- if the Five-Year CMT rate is 4.83% to 4.87%, the Minimum Guarantee Rate is 3.60%;

… 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.

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