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IRS Issues Discount Factors for 2019, Revises 2018 Factors

JUL. 22, 2019

Rev. Proc. 2019-31; 2019-33 IRB 643

DATED JUL. 22, 2019
DOCUMENT ATTRIBUTES
Citations: Rev. Proc. 2019-31; 2019-33 IRB 643

26 CFR 601.201: Rulings and determination letters.

(Also: Part I, Sections 832, 846; 1.832-4, 1.846-1.)

SECTION 1. PURPOSE

This revenue procedure prescribes revised unpaid loss discount factors for the 2018 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under § 846 of the Internal Revenue Code (Code). The revised unpaid loss discount factors also serve as revised salvage discount factors for the 2018 accident year and earlier accident years for use in computing estimated salvage recoverable under § 832 of the Code. Additionally, this revenue procedure prescribes discount factors for the 2019 accident year for use by insurance companies in computing discounted unpaid losses under § 846 and estimated salvage recoverable under § 832. The discount factors prescribed herein were determined under § 846, as amended by section 13523 of Pub. L. No. 115-97 (131 Stat. 2054, 2152), commonly referred to as the Tax Cuts and Jobs Act (TCJA), and final regulations under § 846 (T.D. 9863, 84 FR 27947) (Final Regulations) published on June 17, 2019.

SECTION 2. BACKGROUND

.01 Discounting rules and discount factors.

(1) The discounting rules of § 846 are used to determine discounted unpaid losses under § 832(b)(5), including unpaid loss adjustment expenses included in unpaid losses under § 832(b)(6), and estimated salvage recoverable of property and casualty insurance companies for Federal income tax purposes under § 832(b)(5), as well as discounted unpaid losses of life insurance companies for Federal income tax purposes under §§ 805(a)(1) and 807(c)(2) of the Code. References to unpaid losses hereinafter in this revenue procedure refer to unpaid losses and expenses unpaid (as defined in § 832(b)(5) and (6)) or unpaid losses (as defined in §§ 805(a)(1) and 807(c)(2)), as applicable.

(2) Section 846 provides that discounted unpaid losses must be separately determined for each accident year for each line of business by applying the annual rate determined under § 846(c) and the appropriate loss payment pattern to the amount of unpaid losses as measured at the end of the taxable year. Section 846(d) directs the Secretary to use the most recent aggregate loss payment data of property and casualty insurance companies to determine a loss payment pattern for each line of business every five years. This payment pattern is used to discount unpaid losses for the accident year ending with a determination year and for each of the four succeeding accident years. For every accident year, the Secretary publishes guidance in the Internal Revenue Bulletin that provides discount factors for each line of business based on the annual rate and loss payment patterns determined under § 846.

(3) Section 13523 of the TCJA amended § 846 for taxable years beginning after December 31, 2017. Section 846, as amended by the TCJA, is referred to in this revenue procedure as Amended § 846. Section 13523(a) and (b) amended the definition of annual rate under § 846(c) and the computational rules for loss payment patterns under § 846(d), respectively. Section 13523(c) repealed the election that was previously set forth in § 846(e) to use the insurance company's own historical loss payment pattern instead of the pattern published by the Secretary.

(4) Section 13523(e) of the TCJA provides a transition rule for the application of the amendments made by section 13523. For the first taxable year beginning after December 31, 2017, the unpaid losses at the end of the preceding taxable year are determined as if the amendments made by section 13523 had applied to the unpaid losses in the preceding taxable year and by using the annual rate and loss payment patterns applicable to accident years ended with calendar year 2018. The resulting adjustment, if any, is included in the insurance company's gross income ratably over eight taxable years, beginning with the insurance company's first taxable year beginning after December 31, 2017, and continuing through the seven succeeding taxable years. Section 13523(e) also provides that, for subsequent taxable years, the amendments made by section 13523 are applied with respect to unpaid losses for accident years ended with or before calendar year 2018 by using the annual rate and loss payment patterns applicable to accident years ended with calendar year 2018.

(5) On November 7, 2018, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published proposed regulations under Amended § 846 (REG-103163-18, 83 FR 55646) (Proposed Regulations).

(6) On January 7, 2019, the Treasury Department and the IRS published Rev. Proc. 2019-06, which prescribes unpaid loss discount factors for the 2018 accident year and earlier accident years for use in computing discounted unpaid losses under Amended § 846. The unpaid loss discount factors also serve as salvage discount factors for the 2018 accident year and earlier accident years for use in computing estimated salvage recoverable under § 832. The unpaid loss discount factors prescribed in Rev. Proc. 2019-06 (Proposed Discount Factors) were determined under Amended § 846 and the Proposed Regulations. In Rev. Proc. 2019-06, the Treasury Department and the IRS announced the intent to publish revised unpaid loss discount factors, if necessary, following the publication of the Proposed Regulations as final regulations. In Rev. Proc. 2019-06, the Treasury Department and the IRS also announced the intent to issue guidance on the use of revised discount factors, including the adjustment to be taken into account by certain taxpayers that used the Proposed Discount Factors in a taxable year ended before the date of publication of final regulations.

(7) Under the Proposed Regulations, the annual rate determined under Amended § 846(c) is based on a specific range of maturities (from one-half year to seventeen and one-half years) from the corporate bond yield curve prescribed in Amended § 846(c)(2). Under the Final Regulations, the annual rate determined under Amended § 846(c) is based on a specific range of maturities (from four and one-half years to ten years) from the prescribed corporate bond yield curve. The loss payment patterns for the 2017 determination year are the same under the Proposed Regulations and Final Regulations. The annual rate determined for the 2018 calendar year under the Proposed Regulations is 3.12 percent, compounded semiannually, while the annual rate determined for the 2018 calendar year under the Final Regulations is 2.94 percent, compounded semiannually. Because the annual rate determined under the Final Regulations is different from the annual rate determined under the Proposed Regulations, this revenue procedure prescribes revised discount factors determined under Amended § 846 and the Final Regulations (Revised Discount Factors) and provides guidance on the use of the Revised Discount Factors. Section 6.01(2) of Rev. Proc. 2019-30, 2019-33 I.R.B. ___, published in the same edition of the Internal Revenue Bulletin as this revenue procedure, describes the adjustments to be taken into account by certain taxpayers that used the Proposed Discount Factors in any taxable year ended before June 17, 2019.

(8) This revenue procedure also prescribes discount factors for the 2019 accident year determined under Amended § 846 and the Final Regulations for use by insurance companies in computing discounted unpaid losses under Amended § 846 and estimated salvage recoverable under § 832. These discount factors must be used in taxable years ending on or after June 17, 2019.

.02 Changes in methods of accounting.

In addition to describing the adjustments to be taken into account by certain taxpayers that used the Proposed Discount Factors, Rev. Proc. 2019-30 provides simplified procedures under § 446 of the Code and § 1.446-1(e) of the Income Tax Regulations for an insurance company to obtain automatic consent of the Commissioner of Internal Revenue to change its methods of accounting for discounting unpaid losses and estimated salvage recoverable, as applicable, to comply with Amended § 846.

SECTION 3. SCOPE

This revenue procedure applies to any insurance company that is required to discount unpaid losses under Amended § 846 for a line of business using the discount factors published by the Secretary, and also applies to any insurance company that is required to discount estimated salvage recoverable under § 832. This revenue procedure applies to taxable years beginning after December 31, 2017.

SECTION 4. REVISED DISCOUNT FACTORS

.01 The tables in this section 4 present separately for each line of business the Revised Discount Factors. All of the Revised Discount Factors presented in the tables in this section 4 are determined by using the applicable interest rate for 2018 under Amended § 846(c) and the Final Regulations, which is 2.94 percent, compounded semiannually, and the payment patterns for the 2017 determination year determined by the Secretary under Amended § 846(d) and the Final Regulations. All of the Revised Discount Factors presented in these tables are determined by assuming all loss payments occur in the middle of the calendar year.

.02 An insurance company may use either the Revised Discount Factors or the Proposed Discount Factors for its first taxable year beginning after December 31, 2017, if the company's first taxable year beginning after December 31, 2017, ended before June 17, 2019. However, the insurance company must consistently use the Revised Discount Factors or consistently use the Proposed Discount Factors. An insurance company that uses the Proposed Discount Factors in its first taxable year beginning after December 31, 2017, must take into account the adjustments described in section 6.01(2) of Rev. Proc. 2019-30 in the manner prescribed in section 6.02(2) of Rev. Proc. 2019-30 if the company does not amend the return filed for that year to use the Revised Discount Factors.

.03 Tables 1 and 2 present separately for each line of business the Revised Discount Factors for losses incurred in the 2018 accident year and earlier accident years for use in the first taxable year beginning after December 31, 2017, for purposes of determining discounted unpaid losses under Amended § 846 and estimated salvage recoverable under § 832.

.04 Tables 3 and 4 present separately for each line of business the Revised Discount Factors for losses incurred in the 2017 accident year and earlier accident years for use in the first taxable year beginning after December 31, 2017, for purposes of determining the unpaid losses at the end of the preceding taxable year, as well as the adjustments described in section 2.01(4) of this revenue procedure and section 6.01(1) and (2) of Rev. Proc. 2019-30, which must be taken into account in the manner prescribed in section 6.02(1) and (2) of Rev. Proc. 2019-30.

.05 Tables 5 and 6 present separately for each line of business the Revised Discount Factors for losses incurred in the 2018 accident year for use in taxable years beginning after December 31, 2017, for purposes of determining discounted unpaid losses under Amended § 846 and estimated salvage recoverable under § 832.

.06 Section V of Notice 88-100, 1988-2 C.B. 439, sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Tables 2, 4, 5, and 6 separately provide discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74, 2002-2 C.B. 980.

Table 1 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For the First Taxable Year Beginning After December 31, 2017
Short-Tail Lines of Business

Accident Year

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/ Mortgage Guaranty

International

Other*

2018

98.3892

95.9894

95.7530

96.3010

97.1014

2017

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2017

98.5513

98.5513

98.5513

98.5513

98.5513

*For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2018 is 98.5513 percent.

Table 1 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For the First Taxable Year Beginning After December 31, 2017
Short-Tail Lines of Business

Accident Year

Reinsurance — Nonproportional Assumed Financial Lines

Reinsurance — Nonproportional Assumed Liability

Reinsurance — Nonproportional Assumed Property

Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft)

Warranty

Short-Tail Composite

2018

95.6050

94.8379

96.2833

97.5135

98.1947

96.9951

2017

97.1339

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2017

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Table 2 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For the First Taxable Year Beginning After December 31, 2017
Long-Tail Lines of Business

Accident Year

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims Made

Other Liability — Occurrence

2018

94.0556

91.6544

86.8932

95.3058

90.8915

89.3683

2017

94.7607

92.6388

88.9529

93.6724

91.6944

90.2053

2016

95.2819

92.8576

90.4811

93.9651

92.1992

90.7535

2015

95.3204

93.1388

91.8194

93.2041

92.2415

90.9196

2014

95.2024

93.2805

92.7664

91.4064

92.0976

90.6836

2013

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2012

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2011

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2010

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2009

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using the Composite Method

2008

98.5513

98.5513

98.5513

96.1895

98.0033

95.8511

2007

98.5513

98.5513

98.5513

97.5045

98.5513

97.2176

Years before 2007

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2009

98.5513

98.5513

98.5513

96.9185

98.0920

96.7300

Table 2 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For the First Taxable Year Beginning After December 31, 2017
Long-Tail Business

Accident Year

Private Passenger Auto Liability/ Medical

Products Liability — Claims Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2018

95.6745

85.8982

87.8191

88.0401

92.7568

2017

95.2920

86.3600

89.1417

86.5393

91.7292

2016

95.2520

88.1407

89.8860

85.4517

91.4469

2015

94.8920

83.8076

91.1924

83.9662

90.2933

2014

94.2325

85.0889

89.8810

83.4129

88.7546

2013

94.2824

86.4184

89.9309

82.8905

88.6421

2012

94.5205

87.8040

90.8527

83.2567

88.6258

2011

95.0550

89.0388

91.8072

84.1036

89.1661

2010

95.6473

90.2969

92.1992

84.7150

90.3858

2009

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using the Composite Method

2008

98.5513

92.8838

95.7739

87.8065

93.4541

2007

98.5513

94.2124

97.1571

89.0414

94.7812

2006

98.5513

95.5629

98.5513

90.2995

96.1195

2005

98.5513

96.9299

98.5513

91.5813

97.4421

2004

98.5513

98.2868

98.5513

92.8867

98.5513

2003

98.5513

98.5513

98.5513

94.2154

98.5513

2002

98.5513

98.5513

98.5513

95.5661

98.5513

2001

98.5513

98.5513

98.5513

96.9334

98.5513

2000

98.5513

98.5513

98.5513

98.2913

98.5513

Years before 2000

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2009

98.5513

94.7288

96.6903

91.2579

95.0968

Table 3 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017
Short-Tail Lines of Business

Accident Year

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/ Mortgage Guaranty

International

Other*

2017

98.3892

95.9894

95.7530

96.3010

97.1014

2016

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2016

98.5513

98.5513

98.5513

98.5513

98.5513

* For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2017 is 98.5513 percent.

Table 3 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017
Short-Tail Lines of Business

Accident Year

Reinsurance — Nonproportional Assumed Financial Lines

Reinsurance — Nonproportional Assumed Liablity

Reinsurance — Nonproportional Assumed Property

Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft)

Warranty

Short-Tail Composite

2017

95.6050

94.8379

96.2833

97.5135

98.1947

96.9951

2016

97.1339

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2016

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Table 4 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For the Taxable Year Preceding the First Taxable Year Beginning
After December 31, 2017 Long-Tail Lines of Business

Accident Year

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims Made

Other Liability — Occurrence

2017

94.0556

91.6544

86.8932

95.3058

90.8915

89.3683

2016

94.7607

92.6388

88.9529

93.6724

91.6944

90.2053

2015

95.2819

92.8576

90.4811

93.9651

92.1992

90.7535

2014

95.3204

93.1388

91.8194

93.2041

92.2415

90.9196

2013

95.2024

93.2805

92.7664

91.4064

92.0976

90.6836

2012

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2011

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2010

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2009

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2008

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using the Composite Method

2007

98.5513

98.5513

98.5513

96.1895

98.0033

95.8511

2006

98.5513

98.5513

98.5513

97.5045

98.5513

97.2176

Years before 2006

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2008

98.5513

98.5513

98.5513

96.9185

98.0920

96.7300

Table 4 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For the Taxable Year Preceding the First Taxable Year Beginning After December 31, 2017
Long-Tail Lines of Business

Accident Year

Private Passenger Auto Liability/ Medical

Products Liability — Claims Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2017

95.6745

85.8982

87.8191

88.0401

92.7568

2016

95.2920

86.3600

89.1417

86.5393

91.7292

2015

95.2520

88.1407

89.8860

85.4517

91.4469

2014

94.8920

83.8076

91.1924

83.9662

90.2933

2013

94.2325

85.0889

89.8810

83.4129

88.7546

2012

94.2824

86.4184

89.9309

82.8905

88.6421

2011

94.5205

87.8040

90.8527

83.2567

88.6258

2010

95.0550

89.0388

91.8072

84.1036

89.1661

2009

95.6473

90.2969

92.1992

84.7150

90.3858

2008

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using the Composite Method

2007

98.5513

92.8838

95.7739

87.8065

93.4541

2006

98.5513

94.2124

97.1571

89.0414

94.7812

2005

98.5513

95.5629

98.5513

90.2995

96.1195

2004

98.5513

96.9299

98.5513

91.5813

97.4421

2003

98.5513

98.2868

98.5513

92.8867

98.5513

2002

98.5513

98.5513

98.5513

94.2154

98.5513

2001

98.5513

98.5513

98.5513

95.5661

98.5513

2000

98.5513

98.5513

98.5513

96.9334

98.5513

1999

98.5513

98.5513

98.5513

98.2913

98.5513

Years before 1999

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2008

98.5513

94.7288

96.6903

91.2579

95.0968

Table 5 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2018 in Short-Tail Lines of Business

Taxable Year Beginning in

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/ Mortgage Guaranty

International

Other*

2018

98.3892

95.9894

95.7530

96.3010

97.1014

2019

97.1339

97.1339

97.1339

97.1339

97.1339

Taxpayer Not Using Composite Method

Years after 2019

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

2020

98.5513

98.5513

98.5513

98.5513

98.5513

Years after 2020

Use composite discount factors published for the relevant accident year.**

* For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2018 is 98.5513 percent. For later years, the discount factor for losses incurred in 2018 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year coinciding with the taxable year.

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 5 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2018 in Short-Tail Lines of Business

Taxable Year Beginning in

Reinsurance — Nonproportional Assumed Financial Lines

Reinsurance — Nonproportional Assumed Liability

Reinsurance — Nonproportional Assumed Property

Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft)

Warranty

Short-Tail Composite

2018

95.6050

94.8379

96.2833

97.5135

98.1947

96.9951

2019

97.1339

97.1339

97.1339

97.1339

97.1339

97.1339

Taxpayer Not Using Composite Method

Years after 2019

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

2020

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Years after 2020

Use composite discount factors published for the relevant accident year.**

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 6 (part A)
Revised Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2018 in Long-Tail Lines of Business

Taxable Year

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims Made

Other Liability — Occurrence

2018

94.0556

91.6544

86.8932

95.3058

90.8915

89.3683

2019

94.7607

92.6388

88.9529

93.6724

91.6944

90.2053

2020

95.2819

92.8576

90.4811

93.9651

92.1992

90.7535

2021

95.3204

93.1388

91.8194

93.2041

92.2415

90.9196

2022

95.2024

93.2805

92.7664

91.4064

92.0976

90.6836

2023

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2024

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2025

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2026

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2027

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using Composite Method

2028

98.5513

98.5513

98.5513

96.1895

98.0033

95.8511

2029

98.5513

98.5513

98.5513

97.5045

98.5513

97.2176

Years after 2029

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

2028

98.5513

98.5513

98.5513

96.9185

98.0920

96.7300

Years after 2028

Use composite discount factors published for the relevant accident year.*

*The relevant accident year is the accident year that is ten years prior to the specified taxable year.

Table 6 (part B)
Revised Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2018 in Long-Tail Lines of Business

Taxable Year

Private Passenger Auto Liability/ Medical

Products Liability — Claims Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2018

95.6745

85.8982

87.8191

88.0401

92.7568

2019

95.2920

86.3600

89.1417

86.5393

91.7292

2020

95.2520

88.1407

89.8860

85.4517

91.4469

2021

94.8920

83.8076

91.1924

83.9662

90.2933

2022

94.2325

85.0889

89.8810

83.4129

88.7546

2023

94.2824

86.4184

89.9309

82.8905

88.6421

2024

94.5205

87.8040

90.8527

83.2567

88.6258

2025

95.0550

89.0388

91.8072

84.1036

89.1661

2026

95.6473

90.2969

92.1992

84.7150

90.3858

2027

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using Composite Method

2028

98.5513

92.8838

95.7739

87.8065

93.4541

2029

98.5513

94.2124

97.1571

89.0414

94.7812

2030

98.5513

95.5629

98.5513

90.2995

96.1195

2031

98.5513

96.9299

98.5513

91.5813

97.4421

2032

98.5513

98.2868

98.5513

92.8867

98.5513

2033

98.5513

98.5513

98.5513

94.2154

98.5513

2034

98.5513

98.5513

98.5513

95.5661

98.5513

2035

98.5513

98.5513

98.5513

96.9334

98.5513

2036

98.5513

98.5513

98.5513

98.2913

98.5513

Years after 2036

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

2028

98.5513

94.7288

96.6903

91.2579

95.0968

Years after 2028

Use composite discount factors published for the relevant accident year.*

*The relevant accident year is the accident year that is ten years prior to the specified taxable year.

SECTION 5. DISCOUNT FACTORS FOR TAXABLE YEARS BEGINNING IN 2019

.01 The tables in this section 5 present separately for each line of business discount factors for losses incurred in the 2019 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under Amended § 846 and estimated salvage recoverable under § 832 in taxable years beginning in 2019. Insurance companies must use these discount factors in taxable years ending on or after June 17, 2019. The discount factors for losses incurred in accident year 2019 presented in these tables are determined by using the applicable interest rate for 2019 under Amended § 846(c) and the Final Regulations, which is 3.09 percent, compounded semiannually. Consistent with the transition rule in section 13523(3) of the TCJA, all other discount factors presented in these tables are determined by using the applicable interest rate for 2018, which is 2.94 percent, compounded semiannually. All of the discount factors presented in these tables are determined by using the payment patterns for the 2017 determination year determined by the Secretary under Amended § 846(d) and the Final Regulations and by assuming all loss payments occur in the middle of the calendar year.

.02 Tables 8, 9, and 10 separately provide discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74.

Table 7 (part A)
Discount Factors Under Amended Section 846 (percent)
For Taxable Year(s) Beginning in 2019
Short-Tail Lines of Business

Accident Year

Auto Physical

DamageFidelity/Surety

Financial Guaranty/ Mortgage Guaranty

International

Other*

2019

98.3085

95.7921

95.5443

96.1189

96.9581

2018

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2018

98.5513

98.5513

98.5513

98.5513

98.5513

* For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2019 is 98.4785 percent.

Table 7 (part B)
Factors for Discounting Unpaid Losses Under Section 846 (percent)
For Taxable Year(s) Beginning in 2019
Short-Tail Lines of Business

Accident Year

Reinsurance — Nonproportional Assumed Financial Lines

Reinsurance — Nonproportional Assumed

Assumed Property

Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Burglary & Theft)

Warranty

Short-Tail Composite

2019

95.3891

94.5848

96.1004

97.3903

98.1046

96.8468

2018

97.1339

97.1339

97.1339

97.1339

97.1339

97.1339

Years before 2018

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Table 8 (part A)
Discount Factors Under Amended Section 846 (percent)
For Taxable Year(s) Beginning in 2019
Long-Tail Lines of Business

Accident Year

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims Made

Other Liability — Occurrence

2019

93.7704

91.2627

86.2902

95.0826

90.4676

88.8810

2018

94.7607

92.6388

88.9529

93.6724

91.6944

90.2053

2017

95.2819

92.8576

90.4811

93.9651

92.1992

90.7535

2016

95.3204

93.1388

91.8194

93.2041

92.2415

90.9196

2015

95.2024

93.2805

92.7664

91.4064

92.0976

90.6836

2014

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2013

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2012

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2011

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2010

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using the Composite Method

2009

98.5513

98.5513

98.5513

96.1895

98.0033

95.8511

2008

98.5513

98.5513

98.5513

97.5045

98.5513

97.2176

Years before 2008

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method Years before

2010

98.5513

98.5513

98.5513

96.9185

98.0920

96.7300

Table 8 (part B)
Discount Factors Under Amended Section 846 (percent)
For Taxable Year(s) Beginning in 2019
Long-Tail Lines of Business

Accident Year

Private Passenger Auto Liability/ Medical

Products Liability — Claims Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2019

95.4657

85.2754

87.2645

87.5213

92.4228

2018

95.2920

86.3600

89.1417

86.5393

91.7292

2017

95.2520

88.1407

89.8860

85.4517

91.4469

2016

94.8920

83.8076

91.1924

83.9662

90.2933

2015

94.2325

85.0889

89.8810

83.4129

88.7546

2014

94.2824

86.4184

89.9309

82.8905

88.6421

2013

94.5205

87.8040

90.8527

83.2567

88.6258

2012

95.0550

89.0388

91.8072

84.1036

89.1661

2011

95.6473

90.2969

92.1992

84.7150

90.3858

2010

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using the Composite Method

2009

98.5513

92.8838

95.7739

87.8065

93.4541

2008

98.5513

94.2124

97.1571

89.0414

94.7812

2007

98.5513

95.5629

98.5513

90.2995

96.1195

2006

98.5513

96.9299

98.5513

91.5813

97.4421

2005

98.5513

98.2868

98.5513

92.8867

98.5513

2004

98.5513

98.5513

98.5513

94.2154

98.5513

2003

98.5513

98.5513

98.5513

95.5661

98.5513

2002

98.5513

98.5513

98.5513

96.9334

98.5513

2001

98.5513

98.5513

98.5513

98.2913

98.5513

Years before 2001

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2010

98.5513

94.7288

96.6903

91.2579

95.0968

SECTION 6. DISCOUNT FACTORS FOR THE 2019 ACCIDENT YEAR

.01 The tables in this section 6 present separately for each line of business the discount factors for losses incurred in the 2019 accident year for use by insurance companies in computing discounted unpaid losses under Amended § 846 and estimated salvage recoverable under § 832. All of the discount factors presented in these tables are determined by using the applicable interest rate for 2019 under Amended § 846(c) and the Final Regulations, which is 3.09 percent, compounded semiannually, and the payment patterns for the 2017 determination year determined by the Secretary under Amended § 846(d) and the Final Regulations. All of the discount factors presented in these tables are determined by assuming all loss payments occur in the middle of the calendar year.

.02 Tables 9 and 10 separately provide discount factors for insurance companies who have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74.

Table 9 (part A)
Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2019 in Short-Tail Lines of Business

Taxable Year Beginning in

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/ Mortgage Guaranty

International

Other*

2019

98.3085

95.7921

95.5443

96.1189

96.9581

2020

96.9916

96.9916

96.9916

96.9916

96.9916

Taxpayer Not Using Composite Method

Years after 2020

98.4785

98.4785

98.4785

98.4785

98.4785

Taxpayer Using the Composite Method

2021

98.4785

98.4785

98.4785

98.4785

98.4785

Years after 2021

Use composite discount factors published for the relevant accident year.**

* For Accident and Health lines of business (other than disability income or credit disability insurance), the discount factor for taxable year 2019 is 98.4785 percent. For later years, the discount factor for losses incurred in 2019 is the discount factor published for Accident and Health lines of business for losses incurred in the accident year coinciding with the taxable year.

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 9 (part B)
Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2019 in Short-Tail Lines of Business

Taxable Year Beginning in

Reinsurance — Nonproportional Assumed Financial Lines

Reinsurance — Nonproportional Assumed Liability

Reinsurance — Nonproportional Assumed Property

Special Property (Fire, Allied Lines, Inland Marine, Earthquake Burglary & Theft)

Warranty

Short-Tail Composite

2019

95.3891

94.5848

96.1004

97.3903

98.1046

96.8468

2020

96.9916

96.9916

96.9916

96.9916

96.9916

96.9916

Taxpayer Not Using Composite Method

Years after 2020

98.4785

98.4785

98.4785

98.4785

98.4785

98.4785

Taxpayer Using the Composite Method

2021

98.4785

98.4785

98.4785

98.4785

98.4785

98.4785

Years after 2021

Use composite discount factors published for the relevant accident year.**

**The relevant accident year is the accident year that is two years prior to the specified taxable year.

Table 10 (part A)
Discount Factors Under Amended Section 846 (percent)
For Losses Incurred in Accident Year 2019 in Long-Tail Lines of Business

Taxable Year

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims Made

Other Liability — Occurrence

2019

93.7704

91.2627

86.2902

95.0826

90.4676

88.8810

2020

94.5084

92.2917

88.4392

93.3741

91.3061

89.7544

2021

95.0543

92.5197

90.0344

93.6815

91.8334

90.3264

2022

95.0945

92.8130

91.4323

92.8864

91.8764

90.4989

2023

94.9707

92.9600

92.4216

91.0050

91.7240

90.2502

2024

94.8102

92.9821

93.1951

91.2099

92.2519

90.3215

2025

95.0988

93.9636

94.0439

90.9051

92.7450

90.3437

2026

94.7349

94.8913

94.7551

90.5890

93.5395

91.6011

2027

96.2326

95.8197

95.9308

93.2071

94.6782

92.2678

2028

98.2762

97.6382

97.6800

94.6020

96.5238

94.2296

Taxpayer Not Using Composite Method

2029

98.4785

98.4785

98.4785

96.0017

97.9036

95.6470

2030

98.4785

98.4785

98.4785

97.3803

98.4785

97.0794

Years after 2030

98.4785

98.4785

98.4785

98.4785

98.4785

98.4785

Taxpayer Using the Composite Method

2029

98.4785

98.4785

98.4785

96.8165

98.0085

96.6260

Years after 2029

Use composite discount factors published for the relevant accident year.*

*The relevant accident year is the accident year that is ten years prior to the specified taxable year.

Table 10 (part B)
Discount Factors Under Amended Section 846 (percent)
Losses Incurred in Accident Year 2019 in Long-Tail Lines of Business

Taxable Year

Private Passenger Auto Liability/ Medical

Products Liability — Claims Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2019

95.4657

85.2754

87.2645

87.5213

92.4228

2020

95.0654

85.7548

88.6442

85.9577

91.3501

2021

95.0239

87.6130

89.4203

84.8235

91.0564

2022

94.6472

83.0836

90.7854

83.2721

89.8512

2023

93.9560

84.4151

89.4118

82.6909

88.2413

2024

94.0072

85.7981

89.4605

82.1401

88.1205

2025

94.2553

87.2412

90.4215

82.5155

88.0992

2026

94.8139

88.5278

91.4175

83.3929

88.6595

2027

95.4330

89.8399

91.8241

84.0243

89.9313

2028

97.6150

91.1778

94.1415

85.9823

91.7704

Taxpayer Not Using Composite Method

2029

98.4785

92.5418

95.5661

87.2439

93.1382

2030

98.4785

93.9314

97.0159

88.5305

94.5268

2031

98.4785

95.3452

98.4785

89.8427

95.9284

2032

98.4785

96.7777

98.4785

91.1807

97.3148

2033

98.4785

98.2011

98.4785

92.5447

98.4785

2034

98.4785

98.4785

98.4785

93.9345

98.4785

2035

98.4785

98.4785

98.4785

95.3485

98.4785

2036

98.4785

98.4785

98.4785

96.7814

98.4785

2037

98.4785

98.4785

98.4785

98.2057

98.4785

Years after 2037

98.4785

98.4785

98.4785

98.4785

98.4785

Taxpayer Using the Composite Method

2029

98.4785

94.6171

96.5859

91.1466

94.9858

Years after 2029

Use composite discount factors published for the relevant accident year.*

*The relevant accident year is the accident year that is ten years prior to the specified taxable year.

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective for taxable years beginning after December 31, 2017.

SECTION 8. DRAFTING INFORMATION

The principal author of this revenue procedure is Kathryn M. Sneade of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Ms. Sneade at (202) 317-6995 (not a toll free call).

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