Insurance companies, through their new business issuance activities, normally provide some guaranteed rate of interest. Considering interest rates were low for so long insurance companies needed to properly lock in a positive differential between what they earned on their investments (equities and bonds) and what they pay out on these contracts. This created investment tension as carriers push as far out on the risk/return spectrum as possible.

This resulted in premiums, deposits, reinvestment of interest income and returns of principle on maturing fixed-income securities being placed into lower-yielding investments (short to intermediate treasuries), which will push net investment income down over time.  During the last decade the spread between interest earned and interest credited was severely compressed, which not only reduces net income for the insurer but also has forced them to lower the dividend they credit on in-forced policies. So that means policies could lapse before the illustrated date even though the policy owner is still alive.

Guarantees are based on the claims paying ability of the issuing company.