Definitions for "Market Value Adjustment"
With profit funds adopt an investment strategy that is geared towards the maturity date of the policies. This allows it to adopt a long-term strategy, which means that it can invest in more volatile assets. The unit price does not reflect the rise and fall of the underlying assets. It reflects the bonus rates declared from time to time. These bonuses are not guaranteed except at maturity. If you wish to withdraw your funds before the maturity date then the company may adjust the unit price to reflect the value of the underlying investments. This is often referred to as a Market Value Adjustment.
This provision adjusts the accumulated fund balance upward or downward. The adjustment is in the opposite direction of the movement in the interest rates.
With an MVA, the surrender value of a contract may increase or decrease depending on changes in the U.S. Treasury rates. The adjustment applies to amounts received upon a partial or full surrender, if made during the surrender charge period. It also applies if the policy is annuitized during the surrender charge period regardless of whether or not the surrender charges are waived under certain provisions. The adjustment does not apply when funds are withdrawn under the 10% free withdrawal provision.