What is the crediting rate for an Escrow Shield Plus™ account? How and when can the crediting rate change?

The crediting rate is the earnings rate paid to the merger parties for investments in Escrow Shield Plus and is set by AXA Equitable. Crediting rates for new contracts are updated on a weekly basis.  These become effective every Tuesday at 1pm ET.

As is the case with most financial products such as bank deposits, the applicable crediting rate is subject to change. Most products offering immediate or overnight liquidity adjust earnings rates daily based on the performance of the portfolio (in the case of Money Market Funds or MMFs) or based on the deposit needs of the bank (in the case or Money Market Deposit Accounts of MMDAs). With Escrow Shield Plus, AXA Equitable will change the crediting rate on existing deposits only in limited, defined circumstances as described below. Once money is placed into the product, the crediting rate can change as often as quarterly, but only if one of the following contingencies applies.

Claims Rate Adjustment. Excessive claims submitted by the buyer could reduce the crediting rate for the remaining duration of the contract. This does not impact accrued interest already earned as of such time.

Subsequent deposits into the separate account. The crediting rate may be adjusted downward upon the receipt of subsequent funds because crediting rates that apply to new funds are adjusted on a weekly basis. A blended rate applies. Note that the parties have the option of placing additional funds in new funding agreements rather than adding investments to the existing funding agreement.

Pooled Rate Adjustment. AXA Equitable may declare a Pooled Rate Adjustment to counteract a loss in the market value of an asset held in the separate account that is due to the issuer of the asset either defaulting on its obligations or experiencing a downgrade. AXA Equitable may also declare a Pooled Rate Adjustment if it anticipates that an issuer will default on its obligations due to creditworthiness and AXA Equitable sells the asset of the issuer to avoid further losses. AXA Equitable will not declare a Pooled Rate Adjustment due to a change in market value of a separate account asset that is solely the result of a change in market conditions, such as a spike in interest rates.

While the crediting rate could be reduced in these limited circumstances, the principal balance is guaranteed.  The only circumstance in which it could be reduced is if the parties decide to voluntarily terminate the contract early for a reason unrelated to the satisfaction of a claim or otherwise related to the M&A agreement.  This is similar to the penalty that could be assessed for early withdrawal in a fixed time deposit and is necessary because AXA Equitable will invest the proceeds based on the projected needs of the deposit as a part of an overall investment pool.

See Escrow Shield Plus overview and prospectus for more information.

Contact us at sales@srsacquiom.com to learn more.

Posted in: Services: Escrow Shield Plus