us-irs-revenue-procedures-rp-19-31•rp-19-31.pdf
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26 CFR 601.201: Rulings and determination letters. (Also: Part I, Sections 832, 846; 1.832-4, 1.846-1.) Rev. Proc. 2019-31 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. 2 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 (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 4 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 5 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 6 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 7 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 8 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 9 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) 10 For 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 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 11 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 Liability 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 12 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 13 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. 14 **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 15 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 16 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 17 § 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 Damage Fidelity/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 - Nonproportiona l Assumed Liability Reinsurance - Nonproportiona l Assumed Property Special Property (Fire, Allied Lines, Inland Marine, Earthquake , Burglary & Theft) Warrant y Short-Tail Composit e 18 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 Professiona l Liability - Claims- Made Medical Professiona l 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 19 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 Composit e 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 20 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* 21 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 - Nonproportiona l Assumed Financial Lines Reinsurance - Nonproportiona l Assumed Liability Reinsurance - Nonproportiona l Assumed Property Special Property (Fire, Allied Lines, Inland Marine, Earthquake , Burglary & Theft) Warrant y Short-Tail Composit e 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 22 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) 23 Discount Factors Under Amended Section 846 (percent) For 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. 24 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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