A “Draw Down” is a simulation of carrier renewal rates. We look back into the history of the index and then select a purchase date and track the historical performance of the index and the crediting limiter whatever it is (etc…Cap, Par, Spread, Trigger…) and assume a draw down rate percentage that will worsen the limiter rates in years two through the end of the term. Year one is always contractually guaranteed. We suggest you run one report with no draw down, then one with a moderate draw down of 15% – 30%, and finally one with a high draw down of 40% – 60%. This way you can give your client a range of historical returns in the exact month they are purchasing in instead of one unrealistic illustrated rate.
Call your FMO and tell them the product you are selling and the draw down percentages you would like to see. Remember you can also tell them the title you want on the report. We have included some examples below.
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