Low Water Mark

Low water mark 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. Low water is a crediting method that is based on the difference between the end value of the reference index and the lowest level of the reference index over the term between contract inception and maturity. For example, assume that the given equity index begins the year at 100. Next, assume that this index ends the year at 104, but that its lowest point during the year is 98. In this case, the low water crediting method is based on the difference between 104 and 98. The contract owner would be credited some portion of that difference based on an interest cap or participation rate.