High Water Mark

High water is a term that refers to a fixed indexed annuity crediting method. Indexed annuities credit a level of interest to the contract owner, and this level of credited interest can be indexed or linked to the performance of equity markets. High water is a crediting method that is based on the highest level attained by the reference index over a given period of time. For example, assume that the given equity index begins the year at 500. Next, assume that this index ends the year at 525, but that its highest point during the year is 550. In this case, the high water crediting method is based on 550 which is the highest point during the year. 550 represents a 10 percent increase relative to the 500 starting point, so the contract owner would likely be credited some portion of that 10 percent based on the interest cap or participation rate.