A Market Value Adjustment (“MVA”) is a common discontinuance feature added on to multi-year guaranteed fixed deferred annuities in the USA. Such an annuity guarantees a specified credited interest rate for a fixed period.
Upon the surrender of a fixed annuity the MVA is applied in addition to any surrender charges. The MVA adjustment will be positive in the case of interest rates being lower at surrender than at purchase and negative in the case of interest rates being higher at surrender than at purchase. When purchasing a fixed annuity with MVA the policyholder is effectively assuming the interest-rate risk. In return, the credited interest rates offered on fixed annuities with MVA are generally slightly higher than that offered on a fixed annuity without MVA.
In a rising interest environment where policyholders might want to take advantage of locking into higher guaranteed credited rates by surrendering their existing fixed annuities, the MVA will provide protection to the insurer who could be losing money when having to sell investments at a discount in order to pay out the surrender value.
Please see the links below for articles on sales of Fixed Annuities with MVA as well as the an explanation of Fixed Annuities with MVA by an insurer selling these contracts: