NAIC's GOES Replaces the AIRG: All Three PBR Frameworks Now Run on One Scenario Set

Effective January 1, 2026 the NAIC retired the American Interest Rate Generator and replaced it with the Generator of Economic Scenarios across VM-20, VM-21 and VM-22 at once, converting an interest-rate-only tool into a full economic scenario set that also feeds C3 Phase I and Phase II capital.

Billed as infrastructure, it is a methodology change for every stochastic reserve built on top of it, and a second VM-20 amendment landed on the same effective date pushing the other way.

Key Takeaways

• One generator replaced across three frameworks simultaneously, adopted August 2025 and carried into force by the 2026 Valuation Manual.
• Eight bond-fund classes against the AIRG's three, so credit risk that ran through a coarse three-bucket proxy now runs through a finer distribution of spread and migration outcomes.
• A VM-20 aggregation benefit took effect the same day, allowing cash flows from aggregated policies to net within a common model segment for a given scenario.
• A three-year transition runs to January 1, 2029 for VM-22, and the same election extends to the C3 Phase I and Phase II capital calculations.
• The ACLI has recommended holding the 25 percent C3 Phase II factor, on the basis that field test evidence does not yet justify changing the methodology around the new inputs.

What GOES Changed in the Scenario Set

The AIRG produced interest rate paths only, and every stochastic reserve under VM-20 built its equity and credit assumptions around that single input. GOES replaces it with three components: rates on a stochastic three-factor Cox-Ingersoll-Ross model with a deterministic shift function producing more low-for-long and high-for-long paths, equity returns on a stochastic-volatility-plus-jumps model whose jump process fattens the tails, and bond funds on a proprietary corporate credit model with stochastic spreads and migration.

The bond-fund expansion is the structural piece. GOES ships eight bond-fund classes against the AIRG's three, so credit risk that VM-20 previously handled through a coarse proxy now runs through a materially finer distribution.

For term and universal life with secondary guarantees, the stochastic reserve is no longer driven almost entirely by the interest-rate path in a company's model office. Equity-linked and credit-sensitive features now meet a genuinely joint distribution of rates, equities and credit, which is closer to what VM-21 actuaries have modeled for years. For a VM-20 model validated entirely against AIRG sets, that is a change in what the engine simulates, not a parameter update.

Two Changes on One Date, Pushing Opposite Ways

The NAIC also adopted a VM-20 revision reflecting a benefit of aggregation on the same timeline. Under the prior rule the reserving-category structure and the allocation provision prevented full aggregation across model segments, so a company holding both mortality-heavy and lapse-heavy blocks could not net offsetting exposures even where the scenarios produced natural diversification. The amendment lets aggregated policies net within a common model segment for a given scenario.

So the 2026 VM-20 stochastic reserve for a diversified writer carries two partially offsetting forces: a broader scenario set that raises product-line reserve volatility, and a diversification credit that lowers the aggregated result relative to the sum of undiversified segments.

That has a direct consequence for how the year-over-year movement can be read. A flat reserve is not evidence that nothing happened; it may mean the two effects roughly canceled. Isolating which dominates for a given block requires running the pre-2026 and 2026 bases side by side, because neither can be inferred from the net.

Framework	GOES Effective Date	Phase-In	Field Test Signal
VM-20 (life)	January 1, 2026	Company election, per Valuation Manual	Aggregation benefit adopted concurrently; net reserve direction depends on offsetting scenario and diversification effects
VM-21 (variable annuity)	January 1, 2026	Three-year option, tied to C3 Phase II	GOES Field Test 2 drove higher reserves via lower tail equity GWFs and lower early Treasury rates
VM-22 (non-variable annuity)	January 1, 2026	Three years; mandatory for new issues Jan. 1, 2029	Field testing ran through 2024-2025; capital treatment for business outside VM-22 scope still unsettled

Capital moves on the same inputs, so a risk-based capital ratio can shift for year-end 2026 with no change in the book at all. The Academy's C3 work found the first GOES field test scenario set drove higher variable annuity reserves than the equivalent AIRG run, attributing it to lower tail equity gross wealth factors and lower early-projection Treasury rates. Because VM-21 reserves are floored at cash surrender value, the relationship between the scenario-based reserve and that floor is a major driver of how far the total actually moves.

The industry position sharpens the point. The ACLI has recommended retaining the existing 25 percent factor in the C3 Phase II methodology, arguing field test and model office evidence does not yet justify a change. That is a conservative reading: the inputs moved enough to move reserves, and the methodology around them should hold until more evidence accumulates. A 2026 ratio movement therefore has to be split three ways before it means anything, into exposure change, methodology change, and the scenario distribution itself.

The Reported Reserve Is a Blend, and the Rules Are Still Open

VM-22 adopted GOES from its own January 1, 2026 effective date with a three-year transition before the framework becomes mandatory for all new non-variable annuity issues on January 1, 2029. The same transition option extends to the C3 Phase I and Phase II capital calculations, so a company electing the phase-in for reserves carries a parallel phase-in for capital rather than watching the two bases diverge.

What that produces on a statutory filing is not a single-basis number. It is a weighted blend of the pre-GOES and post-GOES bases, and the actuarial memorandum and Statement of Actuarial Opinion have to disclose the weighting for the figure to be interpretable. Two companies' year-end 2026 reserves are not comparable without knowing whether either elected the phase-in and at what stage.

The governance rules underneath are still being written. The Life Actuarial Task Force is holding public sessions on July 2, 16, 23 and 30, a weekly cadence that signals open implementation questions. The GOES subgroup has exposure drafts covering model change templates and a governance framework, with comment periods closing June 29 and running through July 13. Those rules determine how off-cycle model updates get evaluated, which matters to any company relying on the calibration not shifting again mid-cycle, and they are being finalized weeks before Q3 interim reporting.

Vendor readiness is a separate and non-automatic check. Support runs through native formula-table replication, an API to a separate generator, or direct import of roughly 10-gigabyte prescribed scenario files. A native implementation has to reproduce the NAIC's calibration targets rather than merely load without error, and any scenario reduction used for runtime has to preserve tail behavior, because a reduction tuned to the AIRG's narrower distribution will not necessarily capture GOES's fatter equity tails or wider credit paths.