Summary
This white paper presents a detailed comparison between the Academy Interest Rate Generator (AIRG) and the Generator of Economic Scenarios (GOES) in the context of bond classes. The document outlines the transition that occurred in January 2026, when the NAIC switched its models for reserve and capital calculations for various life and annuity products. It specifically focuses on the differences in projections for Intermediate Bonds and Long Corporate Bonds, detailing how changes in model calibration and duration impact volatility and returns. The paper highlights the substantial differences in yield volatility between the two models, particularly noting that GOES projections are significantly more volatile than those from AIRG. Additionally, it discusses the implications of these differences on asset allocation decisions and the long-term yield targets for Treasuries under both models. The analysis is supported by various figures that illustrate the return distributions and volatility comparisons, providing a comprehensive understanding of the impact of these model changes on bond investments.
