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IRS Issues Unpaid Loss and Salvage Discount Factors for 2023

DEC. 7, 2023

Rev. Proc. 2023-41; 2023-52 IRB 1607

DATED DEC. 7, 2023
DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2023-35344
  • Tax Analysts Electronic Citation
    2023 TNTF 234-25
Citations: Rev. Proc. 2023-41; 2023-52 IRB 1607

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 discount factors for the 2023 accident year for use by insurance companies in computing discounted unpaid losses under §846 of the Internal Revenue Code and discounted estimated salvage recoverable under §832.

This revenue procedure also provides, for convenience, discount factors for losses incurred in the 2022 accident year and earlier accident years for use in taxable years beginning in 2023. The discount factors for accident years before 2023 were prescribed in earlier revenue procedures. See, e.g., Rev. Proc. 2023-10, 2023-3 I.R.B. 411. For background concerning the loss payment patterns and application of the discount factors, see Rev. Proc. 2023-10.

SECTION 2. SCOPE

This revenue procedure applies to any insurance company that is required to discount unpaid losses under §846 for a line of business using the discount factors published by the Secretary. This revenue procedure also applies to any insurance company that is required to discount estimated salvage recoverable under §832.

SECTION 3. DISCOUNT FACTORS FOR THE 2023 ACCIDENT YEAR

.01 The tables in this section 3 separately present for each line of business the discount factors for losses incurred in the 2023 accident year for use by insurance companies in computing discounted unpaid losses under §846 and estimated salvage recoverable under §832. The discount factors presented in this section are generally determined by using the applicable interest rate for 2023 under §846(c), which is 2.90 percent, determined using semiannual compounding. The exceptions are the discount factors for long-tail lines of business determined using the composite method described in section V of Notice 88-100, 1988-2 C.B. 439. These discount factors are to be used in taxable years beginning in 2033 for losses incurred in accident years not separately reported on the annual statement for 2033. For taxable years beginning after 2033, the discount factors to be used for losses incurred in the 2023 accident year will be those determined using the composite method for later accident years. These discount factors will be published in later years. All discount factors are determined by assuming that all loss payments occur in the middle of the calendar year.

.02 Section V of Notice 88-100 sets forth a composite method for computing discounted unpaid losses for accident years that are not separately reported on the annual statement. Tables 1 and 2 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. The discount factors computed using the composite method are unrelated to the composite discount factors referred to in §1.846-1(b)(1)(ii) and (4) of the Income Tax Regulations, which apply to lines of business for which the Secretary has not published discount factors. The composite discount factors for use with respect to such lines of business are labelled “Short-Tail Composite” (in Table 1, part B) and “Long-Tail Composite” (in Table 2, part B). The “Miscellaneous Casualty” discount factors referenced in §1.846-1(b)(2) are not set forth in tables but are equivalent to the “Short-Tail Composite” discount factors.

Table 1 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Short-Tail Lines of Business

Taxable Year Beginning in

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/Mortgage Guaranty

International

Other*

2023

98.3826

95.7477

95.2511

95.8842

96.9968

2024

97.1719

97.1719

97.1719

97.1719

97.1719

Taxpayer Not Using Composite Method

Years after 2024

98.5707

98.5707

98.5707

98.5707

98.5707

Taxpayer Using the Composite Method

2025

98.5707

98.5707

98.5707

98.5707

98.5707

Years after 2025

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

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount factor for taxable year 2023 is 98.5707 percent. This is also the discount factor used in later taxable years for taxpayers not using the composite method. For taxpayers using the composite method, the discount factor for losses incurred in 2023 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 1 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 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

2023

95.8574

94.9260

96.2110

97.5931

98.3742

97.2238

2024

97.1719

97.1719

97.1719

97.1719

97.1719

97.1719

Taxpayer Not Using Composite Method

Years after 2024

98.5707

98.5707

98.5707

98.5707

98.5707

98.5707

Taxpayer Using the Composite Method

2025

98.5707

98.5707

98.5707

98.5707

98.5707

98.5707

Years after 2025

Use composite method 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 2 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

Taxable Year Beginning in

Commercial Auto/Truck Liability/Medical

Medical Professional Liability — Claims-Made

Medical Professional Liability — Occurrence

Multiple Peril Lines

Other Liability — Claims-Made

Other Liability — Occurrence

2023

94.0669

91.7012

86.8831

95.4382

91.4237

90.0155

2024

94.6657

92.7807

88.7877

93.8732

92.3628

90.8746

2025

95.2185

93.1025

90.1803

93.9066

92.4061

91.5784

2026

95.5234

93.9577

91.5512

93.8414

92.6133

91.9264

2027

95.4250

93.7878

92.3543

93.6275

92.5473

92.2284

2028

94.9588

94.4205

92.7420

93.8836

92.5915

91.2169

2029

94.9803

93.9949

93.1270

93.9644

92.2397

91.1996

2030

95.4526

94.8602

92.9930

95.7120

93.9160

91.9425

2031

96.4116

96.1752

94.7992

96.5370

96.4131

92.9346

2032

98.2559

97.6318

96.4691

97.9721

96.9986

94.7538

Taxpayer Not Using Composite Method

2033

98.5707

98.5707

97.7548

98.5707

98.3447

96.0789

2034

98.5707

98.5707

98.5707

98.5707

98.5707

97.3969

Years after 2034

98.5707

98.5707

98.5707

98.5707

98.5707

98.5707

Taxpayer Using the Composite Method

2033

98.5707

98.5707

97.9643

98.5876

98.3699

97.0305

Years after 2033

Use composite method 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 2 (part B)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2023 in Long-Tail Lines of Business

Taxable Year Beginning in

Private Passenger Auto Liability/Medical

Products Liability — Claims-Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2023

95.8562

89.1780

88.5317

88.9551

93.4051

2024

95.5202

90.4947

89.9028

87.4781

92.7019

2025

95.6012

90.7369

91.0112

86.8945

92.4617

2026

95.5203

89.7998

91.5875

86.4217

91.8247

2027

94.6286

91.2853

91.9130

86.7149

91.5295

2028

94.0135

92.8707

92.3814

86.1127

91.0702

2029

94.5794

94.5952

93.2984

86.7030

91.3120

2030

94.7253

95.0313

93.5893

88.1853

92.6078

2031

95.4710

96.2767

94.6085

89.5932

93.9475

2032

97.6138

97.9342

96.6089

90.5104

95.2242

Taxpayer Not Using Composite Method

2033

98.5707

98.5707

97.8975

91.7803

96.5456

2034

98.5707

98.5707

98.5707

93.0739

97.8319

2035

98.5707

98.5707

98.5707

94.3915

98.5707

2036

98.5707

98.5707

98.5707

95.7327

98.5707

2037

98.5707

98.5707

98.5707

97.0957

98.5707

2038

98.5707

98.5707

98.5707

98.4690

98.5707

Years after 2038

98.5707

98.5707

98.5707

98.5707

98.5707

Taxpayer Using the Composite Method

2033

98.5707

96.6888

98.2220

92.8090

96.9820

Years after 2033

Use composite method 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 4. DISCOUNT FACTORS FOR TAXABLE YEARS BEGINNING IN 2023

.01 The tables in this section 4 present separately for each line of business discount factors for losses incurred in the 2023 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under §846 and estimated salvage recoverable under §832 in taxable years beginning in 2023.

.02 Tables 3 and 4 separately provide discount factors for insurance companies that have elected to use the composite method of Notice 88-100. See Rev. Proc. 2002-74. The discount factors computed using the composite method are unrelated to the composite discount factors referred to in §1.846-1(b)(1)(ii) and (4), which apply to lines of business for which the Secretary has not published discount factors. The composite discount factors for use with respect to such lines of business are labelled “Short-Tail Composite” (in Table 3, part B) and “Long-Tail Composite” (in Table 4, part B). The “Miscellaneous Casualty” discount factors referenced in §1.846-1(b)(2) are not set forth in tables but are equivalent to the “Short-Tail Composite” discount factors.

Table 3 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Short-Tail Lines of Business

Accident Year

Auto Physical Damage

Fidelity/Surety

Financial Guaranty/Mortgage Guaranty

International

Other*

2023

98.3826

95.7477

95.2511

95.8842

96.9968

2022

97.3911

97.3911

97.3911

97.3911

97.3911

Taxpayer Not Using Composite Method

2021

98.5999

98.5999

98.5999

98.5999

98.5999

2020

98.4834

98.4834

98.4834

98.4834

98.4834

2019

98.4785

98.4785

98.4785

98.4785

98.4785

Years before 2019

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2022

98.5999

98.5999

98.5999

98.5999

98.5999

*For the Accident and Health line of business (other than disability income or credit disability insurance), the discount factor for taxable year 2023 is 98.5707 percent.

Table 3 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
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

2023

95.8574

94.9260

96.2110

97.5931

98.3742

97.2238

2022

97.3911

97.3911

97.3911

97.3911

97.3911

97.3911

Taxpayer Not Using Composite Method

2021

98.5999

98.5999

98.5999

98.5999

98.5999

98.5999

2020

98.4834

98.4834

98.4834

98.4834

98.4834

98.4834

2019

98.4785

98.4785

98.4785

98.4785

98.4785

98.4785

Years before 2019

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2022

98.5999

98.5999

98.5999

98.5999

98.5999

98.5999

Table 4 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
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

2023

94.0669

91.7012

86.8831

95.4382

91.4237

90.0155

2022

95.0679

93.3168

89.6041

94.3300

92.9253

91.5404

2021

95.4344

93.0842

90.7809

94.1554

92.4448

91.0405

2020

95.1096

92.8346

91.4580

92.9075

91.9007

90.5269

2019

94.9707

92.9600

92.4216

91.0050

91.7240

90.2502

2018

95.0498

93.3035

93.5069

91.6039

92.6040

90.7542

2017

95.3260

94.2423

94.3189

91.3154

93.0770

90.7788

2016

94.9804

95.1291

94.9993

91.0177

93.8378

91.9830

2015

96.4102

96.0160

96.1220

93.5200

94.9264

92.6228

2014

98.3585

97.7503

97.7902

94.8530

96.6876

94.4974

Taxpayer Not Using the Composite Method

2013

98.5513

98.5513

98.5513

96.1895

98.0033

95.8511

2012

98.5513

98.5513

98.5513

97.5045

98.5513

97.2176

Years before 2012

98.5513

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2014

98.5513

98.5513

98.5513

96.9185

98.0920

96.7300

Table 4 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2023
Long-Tail Lines of Business

Accident Year

Private Passenger Auto Liability/Medical

Products Liability — Claims-Made

Products Liability — Occurrence

Workers' Compensation

Long-Tail Composite

2023

95.8562

89.1780

88.5317

88.9551

93.4051

2022

95.8589

91.1883

90.6396

88.3566

93.2372

2021

95.4048

88.4963

90.1990

85.8758

91.7095

2020

94.6635

83.1315

90.8125

83.3180

89.8805

2019

93.9560

84.4151

89.4118

82.6909

88.2413

2018

94.2824

86.4184

89.9309

82.8905

88.6421

2017

94.5205

87.8040

90.8527

83.2567

88.6258

2016

95.0550

89.0388

91.8072

84.1036

89.1661

2015

95.6473

90.2969

92.1992

84.7150

90.3858

2014

97.7282

91.5785

94.4133

86.5946

92.1457

Taxpayer Not Using the Composite Method

2013

98.5513

92.8838

95.7739

87.8065

93.4541

2012

98.5513

94.2124

97.1571

89.0414

94.7812

2011

98.5513

95.5629

98.5513

90.2995

96.1195

2010

98.5513

96.9299

98.5513

91.5813

97.4421

2009

98.5513

98.2868

98.5513

92.8867

98.5513

2008

98.5513

98.5513

98.5513

94.2154

98.5513

2007

98.5513

98.5513

98.5513

95.5661

98.5513

2006

98.5513

98.5513

98.5513

96.9334

98.5513

2005

98.5513

98.5513

98.5513

98.2913

98.5513

Years before 2005

98.5513

98.5513

98.5513

98.5513

98.5513

Taxpayer Using the Composite Method

Years before 2014

98.5513

94.7288

96.6903

91.2579

95.0968

SECTION 5. DRAFTING INFORMATION

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

DOCUMENT ATTRIBUTES
  • Institutional Authors
    Internal Revenue Service
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Tax Analysts Document Number
    2023-35344
  • Tax Analysts Electronic Citation
    2023 TNTF 234-25
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