As a reminder, Interim Value is used to calculate account value when a client withdraws money, partial or full, or when a client utilizes the Performance Lock feature before the segment term date. In the first quarter of 2023, the National Association of Insurance Commissioner released the Actuarial Guideline 54 (AG-54). One of the primary purposes of this guideline was to create continuity among the various RILA products in the market, specifically the calculation of Interim Values during Index Strategy Terms. Some products had proprietary formulas to determine Interim Values, and others used variations of the Black-Scholes formula. AG-54 created guidelines that all RILA
products must utilize the Black-Scholes or a similar formula and must comply by July 2024. Based on this regulation, a few firms had to update their products to comply and launch a second version with thenew Interim Value formula requirement. The direct effectof the new formula, carriers updated and enhanced their performance lock feature since the Interim Value is used to calculate the performance when a client locks in the value. The enhancement of the performance lock was to add a type of fixed ‘holding’ account as well as allowing the client to re-enter the market sooner than the original segment term date. With the updated versions, most carriers will allow the client a choice of either staying in the fixed account or entering a new segment on contract anniversary date. Since the carriers were filing new prospectuses, they took the opportunity to add additional enhancements and to ‘clean up’ features with little or no flows. Some of the enhancements included adding and/or removing protection levels, adding and/ or removing indices, and changing the death benefits to either include or enhance the existing ROP DB.
