Market value adjustment without death or maturity benefits
A contract permits the issuer to deduct an MVA from surrender payments to reflect current market prices for the underlying assets. The contract does not permit a MVA for death and maturity benefits. The amount payable on death or maturity is the amount originally invested plus interest.
The policyholder obtains an additional benefit because no MVA is applied on death or maturity. However, that benefit does not transfer insurance risk from the policyholder because it is certain that the policyholder will live or die and the amount payable on death or maturity is adjusted for the time value of money. Therefore, the contract is an investment contract because there is no significant insurance risk. This contract combines the two features discussed in Examples 53.11 and 53.12 at 3.9.1 above. When considered separately, these two features transfer insurance risk. However, when combined, they do not transfer insurance risk. Therefore, it is not appropriate to separate this contract into two insurance components.
If the amount payable on death were not adjusted in full for the time value of money, or were adjusted in some other way, the contract might transfer insurance risk.