What Is a Market Value Adjustment?
A market value adjustment (MVA) is a feature in some fixed annuity and MYGA contracts that modifies the surrender value — up or down — based on changes in interest rates since you purchased the contract. If rates have risen since your purchase date, the MVA will typically reduce your surrender value. If rates have fallen, the MVA may increase it.
Why MVAs Exist
Insurance carriers invest premiums in long-duration bonds and similar instruments. When rates rise, those bonds lose market value. If many policyholders surrender at the same time in a rising rate environment, the carrier could face losses. The MVA transfers some of that interest rate risk back to the policyholder — but it also gives policyholders a benefit if they surrender when rates have fallen.
MVA vs. Surrender Charge
These are two separate potential deductions on an early surrender:
- Surrender charge: A flat, declining penalty schedule (e.g., 9% in year 1, dropping to 0% by year 10).
- MVA: A market-driven adjustment that can be positive or negative, applied on top of or in lieu of surrender charges depending on the contract design.
Some contracts have both; some have only one.
Policies With and Without MVAs
Not all annuities include MVAs. Many fixed indexed annuities and some MYGAs are sold without them. When comparing products, confirm whether an MVA applies and how it is calculated. A product without an MVA provides more predictable access to your funds if you need to surrender early.