How to Change Interest Rate for Life Insurance Nonforfeiture Values
The interest rate for minimum nonforfeiture values for life insurance products is changing effective 1/1/2025. For long-duration life insurance products, the rate is changing from 3.75% to 4.50%. Please check with your filing actuary to confirm whether an updated actuarial memorandum is required to reflect the change in interest rate.
Filing Information Notice 2020-1 (FIN 2020-1) provides guidance on implementing changes in nonforfeiture interest rates and is applicable for the upcoming change. FINs are available on the Compact website under Industry Resources > Filing Information Notices.
Please note that any changes based on a 4.50% interest rate cannot be implemented earlier than 1/1/2025, regardless of filing approval date.
FAQs for the upcoming nonforfeiture interest rate change:
- When should companies submit filings related to changes in the nonforfeiture interest rate?
- As soon as possible to ensure approval prior to 1/1/2025. Generally, we encourage filers to budget 30-60 review days for approval of a Supporting Documentation update filing; increased filing volume from the nonforfeiture interest rate change may impact this review timeline. If your company requires a quicker approval, please consider using the Expedited Review Program. More details on the program and how to submit a request for expedited review can be found on the Industry Resources page of the Compact website.
- As soon as possible to ensure approval prior to 1/1/2025. Generally, we encourage filers to budget 30-60 review days for approval of a Supporting Documentation update filing; increased filing volume from the nonforfeiture interest rate change may impact this review timeline. If your company requires a quicker approval, please consider using the Expedited Review Program. More details on the program and how to submit a request for expedited review can be found on the Industry Resources page of the Compact website.
- A term product with no cash values was previously filed and approved demonstrating that no cash values are required under Model # 808 assuming an interest rate of 3.75%. Is an updated actuarial memorandum required to be filed with demonstrations using 4.50%?
- No, since the demonstrations using 3.75% are still valid under at 4.5% nonforfeiture interest rate for minimum values.
- No, since the demonstrations using 3.75% are still valid under at 4.5% nonforfeiture interest rate for minimum values.
- If a product was previously approved using a 4.50% interest rate for cash values, then updated via another filing to use 3.75%, is another filing required to change back to 4.50%?
- Yes. Actuarial memorandums submitted to the Compact must describe how nonforfeiture values are determined for current issues, including formulas and assumptions such as interest. If the interest rate used to determine cash values for current issues is changing, a revised actuarial memorandum must be filed for prior approval, regardless of whether it is similar to a previously approved version of the product.
If you have any questions regarding this Weekly Tip or submitting a filing, please contact the Insurance Compact Office.
* This tip is updated following publication to include that implementation of the change may be deferred for issue no later than 1/1/26. Regardless of the implementation timeline, it is incumbent on the filing company to ensure that any filing needs are submitted with sufficient time for review and approval prior to implementation.
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