Inverse Performance Trigger

Inverse performance trigger 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. The inverse performance trigger method involves a level of credited interest that is based on the reference index having a negative return over some period of time. For example, assume that the reference index begins the year at 500. Next, assume that the value of this reference index at the end of the year is 498. The negative return or performance of this index would trigger a declared crediting rate that is set at contract inception. The declared rate is used to credit a level of interest to the contract owner despite the fact that there have been negative returns. An inverse performance trigger is considered a hedge against market declines. Also see the definition of performance triggered.