The rate at the top of an indexed universal life illustration is the smaller of two numbers the guideline computes, and neither is the insurer's expected index credit. One is the arithmetic mean of 10,072 rolling 25-year backcasts of a single Benchmark Index Account; the other is 145% of the insurer's Annual Net Investment Earnings Rate (NAIC Actuarial Guideline XLIX-A, Section 4.B).
It applies to any illustration subject to the Life Insurance Illustrations Model Regulation (#582) on a policy offering Indexed Credits, for policies sold on or after December 14, 2020. Two amendments have followed: a leverage limit for non-benchmark accounts from May 1, 2023, and a Section 7 rewrite on historical displays from April 1, 2026. This reference reproduces the maximum illustrated rate from the guideline's own definitions, with a cap-by-earned-rate table, for the life and retirement readers who review these illustrations.
Key Takeaways
- 10,072 windows feed the Section 4.A lookback behind a 2026 illustration: one 25-year period per trading day from December 31, 1960 through December 29, 2000, each credited at a 0% floor, 100% participation and the current cap, with the illustrated rate set at the mean of their geometric averages.
- 5.84% at a 9% cap and 6.83% at 11% is what that lookback computes from S&P 500 price history, against 11.71% uncapped, so the cap alone removes close to half of the index's price return before the earned-rate test is applied.
- 6.38% is 145% of the 4.4% net investment yield the life industry reported for 2024 (NAIC), and it overtakes the lookback at a cap of about 10.05%; an insurer earning 4.0% hits its 5.80% ceiling at a cap of 8.9% and shows the same rate at 9.5%, 10% or 11%.
- 50 basis points is the most the illustrated credit on loaned values may exceed the illustrated loan rate under Section 6, down from the 100 basis points the 2015 AG 49 allowed, and the Alternate Scale ledger that must appear beside it permits no spread at all.
- 13 companies were reviewed for the November 2025 amendment, which found historical averages "often 2-4x the maximum illustrated rate" and, for policies sold on or after April 1, 2026, bars any historical return other than the two required tables.
The Benchmark Index Account and the 25-Year Lookback
Section 3.D defines the account every illustration is measured against. Its interest is the percent change in the S&P 500 over one year, using only the beginning and ending index values, subject to an annual cap, a 0% floor and a 100% participation rate, credited once a year. Its hedge budget may not exceed the Annual Net Investment Earnings Rate, and charges of any kind may not be used to raise the cap.
No enhancements are permitted, "including but not limited to experience refunds, multipliers, or bonuses," and no allocation limits. A policy has exactly one such account. An insurer that sells none constructs a hypothetical one with a supportable current cap (Section 4.A.ii), so the benchmark exists for every policy whether or not a buyer can choose it.
Section 4.A then backcasts that account. A geometric average annual credited rate is computed for the 25-year period starting on December 31 of the calendar year 66 years before the current one. It is computed again for each 25-year period starting on every subsequent trading day, ending with the period that closes on December 31 of the prior year. For a 2026 illustration the first window opens on December 31, 1960 and the last on December 29, 2000: 10,072 windows in the S&P 500 daily series. Section 4.B.i takes the arithmetic mean of their geometric averages, so the lookback depends on the cap alone.
| Current cap | Section 4.B.i lookback mean | Max rate at 4.0% earned | Max rate at 4.5% earned | Max rate at 5.0% earned |
|---|---|---|---|---|
| 7% | 4.73% | 4.73% | 4.73% | 4.73% |
| 8% | 5.30% | 5.30% | 5.30% | 5.30% |
| 9% | 5.84% | 5.80%* | 5.84% | 5.84% |
| 9.5% | 6.10% | 5.80%* | 6.10% | 6.10% |
| 10% | 6.35% | 5.80%* | 6.35% | 6.35% |
| 11% | 6.83% | 5.80%* | 6.53%* | 6.83% |
| 12% | 7.27% | 5.80%* | 6.53%* | 7.25%* |
| No cap | 11.71% | 5.80%* | 6.53%* | 7.25%* |
Computed from daily S&P 500 closing prices (price return, no dividends; the ^GSPC series of the index S&P Dow Jones Indices publishes) for 10,072 windows opening on December 31, 1960 and on each trading day through December 29, 2000. Each window runs 25 annual point-to-point segments, using the last prior close for non-trading anniversaries, and credits each segment the lesser of the cap and the greater of zero and the index change. Window averages are then averaged arithmetically (Section 4.B.i). Right-hand columns apply Section 4.B.ii at 145% of the stated earned rate; an asterisk marks cells that test sets. No cell is any insurer's number.
Two things in the table are easy to miss on a rate sheet. Most of the work is done by the cap: at 9.5% the mean falls from 11.71% uncapped to 6.10%. The segments the cap truncates are the ones that built the index's long-run return, and the 0% floor gives back far less in the down years than the cap takes in the up years. And the mean hides a wide range. At a 9.5% cap the 10,072 windows run from 4.20% to 7.43%, the pair of figures the Section 7.B.ii disclosure table shows the buyer as the minimum and maximum of the geometric averages.
The 145% Earned-Rate Test and Where It Overtakes the Lookback
Section 3.B defines the second limit's base. The Annual Net Investment Earnings Rate is the gross portfolio earnings rate of the general account assets allocated to support the policy, excluding the hedge assets behind the Indexed Credits, less investment expenses and default cost, and charges cannot raise it. That figure is company-specific and policy-specific, so two insurers with identical 9.5% caps can illustrate different maximums. In the table's 4.0% column the pattern is visible: a 5.80% ceiling binds at a cap of about 8.9%, and the insurer illustrates 5.80% whether its cap is 9%, 10% or 11%.
Industry yields put that ceiling in range of current caps. Life insurers' net rate of return on general account assets was 4.43% in 2023, up from 4.22% in 2022 (ACLI Life Insurers Fact Book, Tables 4.8 and 4.13, 2024 edition), and the industry's net investment yield rose 0.2 points to 4.4% in 2024 (NAIC, 2024 Annual Results). Both are statutory portfolio yields; the guideline's rate is allocated to the policy and net of hedge assets, so they serve as a proxy.
At 4.4% the 145% test gives 6.38% and overtakes the lookback at a cap of roughly 10.05%, so an insurer at the industry yield gains nothing on the illustration from a cap above that level.
Both limits draw on the hedge budget. Section 3.D.vi says the budget behind the benchmark cap may not exceed the earned rate, so the cap is bought from the general account yield, and a cap the yield cannot fund is either charge-subsidised, which 3.D.vi bars, or unsustainable. The 45% margin is the guideline's allowance for illustrated option leverage; Section 5.A.i repeats it, limiting the disciplined current scale's earned rate to the Annual Net Investment Earnings Rate plus 45% of the lesser of the hedge budget and that rate. The option budget a cap consumes is worked through in the site's FIA option budget and cap rate piece.
A live rate sheet shows the gap between the guideline's number and the one carriers print. Nationwide's YourLife IUL rate guide, current as of March 15, 2026, lists a one-year S&P 500 point-to-point strategy at a 9.25% cap, 100% participation and 0% floor, a guaranteed cap of 3%, and a fixed account at 3.75% (Nationwide, 2026). Its own look-back disclosure for that strategy reads 6.34% over 25 years and 6.41% over 30, each a single period ending January 15, 2026.
Under Section 4.A the mean at a 9.25% cap computes to 5.97%, because the guideline averages every 25-year window since 1960 and the sheet reports only the latest one, and the 145% test holds that figure only if the allocated earned rate is at least 4.12%. Nowhere does the sheet state the AG 49-A maximum. What a buyer sees as a look-back and what the illustration may use are different calculations.
Beside the illustrated scale the buyer also sees the Alternate Scale. Section 3.A sets each index account's rate at the lesser of the maximum illustrated rate less 100 basis points and the fixed account's credited rate, never below the guaranteed rate. For a policy with a 3.75% fixed account the Alternate Scale runs at 3.75% at most, and Section 7.B.i requires its ledger alongside the illustrated scale with equal prominence.
Section 6 closes the loan route. If the illustration includes a loan, the illustrated Policy Loan Interest Credited Rate may not exceed the illustrated Policy Loan Interest Rate by more than 50 basis points: "if the illustrated Policy Loan Interest Rate is 4.00%, the Policy Loan Interest Credited Rate shall not exceed 4.50%" (NAIC AG XLIX-A, Section 6). AG 49 in 2015 had allowed 100 basis points, and the halving took effect with AG 49-A on December 14, 2020 (InsuranceNewsNet, December 2020). On the Alternate Scale the credited rate may not exceed the loan rate at all (Section 3.A.ii).
With a 5.97% maximum and a 4.00% loan, the loaned portion of the account illustrates at 4.50%, so the 197 basis points of spread that sold the indexed loan as a retirement income engine is gone from the ledger. For an index account the credited rate on loaned value is also measured net of any Supplemental Hedge Budget (Section 3.N.ii), so a charge-funded account cannot recover the spread through its multiplier.
Every Other Index Account, the 2023 Leverage Limit and the 2026 Section 7
Section 4.C is where the benchmark becomes a ceiling for the whole product. For any other index account, the illustrated rate, measured before any charge that funds a Supplemental Hedge Budget, may not exceed the least of three figures:
- the benchmark rate plus that account's Supplemental Hedge Budget;
- a rate reflecting the account's fundamental characteristics and its risk-and-return relationship to the benchmark, set by actuarial judgment with a lookback consistent with Section 4.A;
- for policies sold on or after May 1, 2023, the benchmark rate scaled by the ratio of the lesser of the two hedge budgets to the benchmark's, plus the Supplemental Hedge Budget.
A Supplemental Hedge Budget (Section 3.O) is the account's hedge budget above the lesser of the earned rate and the benchmark budget, and it can never be negative. Every engineered account, volatility-controlled, multiplied or bonused, is therefore priced off the same two inputs the benchmark uses: the general account yield and the option budget it funds.
That first limb ended the multiplier illustrations the 2020 guideline was written against. In the example Richard Hoffer, Katie van Ryn and Alexander Tall of Oliver Wyman gave in Product Matters (SOA, June 2023), a 200% multiplier funded by a 5% account value charge lifted the illustrated rate by 6.5 points before AG 49-A, a net 1.5 points after the charge. Under 4.C.i the charge buys a Supplemental Hedge Budget of 5 points and the illustrated rate rises by exactly 5, so a charge-funded multiplier can return only the charge.
Its third limb is the 2023 fix. Uncapped volatility-controlled indices are cheaper to hedge than the benchmark, and some designs routed the saving into a fixed bonus that illustrated at face value. NAIC's project history records regulators' concern that these designs illustrated more favourably than a traditional capped S&P 500 account (NAIC Executive Committee and Plenary, March 2023). Adoption ran through the Life Actuarial (A) Task Force on December 11, 2022, the A Committee on February 24, 2023 and Plenary on March 25, 2023.
In the Oliver Wyman example a benchmark hedged at 5% and illustrated at 6.5% carries leverage of 1.3. An account hedged 2 points cheaper and paying the 2 points as a bonus illustrated at 8.5% before the fix. Under 4.C.iii the 3 points of hedge budget illustrate at 1.3 times, or 3.9%, and the 2-point bonus at one for one, so the account tops out at 5.9%, below the benchmark it was built to beat.
A second amendment addressed what sat around the capped rate. An amendment proposal from Rachel Hemphill of Texas and Ben Slutsker of Minnesota reviewed illustrations from 13 companies. Only one showed no historical averages or backcasting, five added a chart setting historical averages beside the maximum illustrated rate, and "the historical averages were often 2-4x the maximum illustrated rate" (NAIC LATF, November 2025). LATF adopted the rewritten Section 7 on November 13, 2025 and Plenary on December 11, 2025, for policies sold on or after April 1, 2026.
Only two histories may now appear in the basic illustration: the minimum and maximum of the Section 4.A geometric averages for the benchmark, and for each index account a table of the most recent 25 years of actual index changes with hypothetical credits at current parameters. An index younger than 10 years gets no table; one between 10 and 25 years is limited to its Historical Period. Nothing else historical may appear, no side-by-side of history against the maximum rate is allowed, and the illustration carries the statement "Historical index changes shown in this illustration are not indicative of future returns."
The American Academy of Actuaries' Life Illustrations Subcommittee, writing to the task force on October 15, 2025, had argued for a five-year minimum on the ground that buyers benefit from seeing actual index volatility even over a short period. It also noted that Model 245 on the annuity side, covered here when AG 49-B reform advanced in spring 2026, permits policy-value illustrations on ten years of history that AG 49-A has never allowed (American Academy of Actuaries, October 2025). Regulators kept ten.
The amended guideline still assumes the one input it does not police. Every lookback window, every table cell and the new 25-year history table credit the current cap; its only provision for a changing cap is the three-month update window Section 4 allows each January. On the Nationwide sheet the 9.25% cap is guaranteed at 3%, and the same 10,072 windows at a 3% cap average 2.16%, a figure no ledger shows. An Alternate Scale is built off the maximum rate less 100 basis points, the disclosure says history is not indicative of future returns, and the cap itself, whose history a buyer most needs, has no table.