rp-20-48.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. 2020-48

SECTION 1. PURPOSE

This revenue procedure prescribes discount factors for the 2020 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 2019 accident year and earlier accident years for use in taxable years
beginning in 2020. The discount factors for accident years before 2020 were prescribed
in Rev. Proc. 2019-31, 2019-33 I.R.B. 643. See Rev. Proc. 2019-31 and Rev. Proc.
2019-06, 2019-02 IRB 284, for background concerning the loss payment patterns and
application of the discount factors.
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, and also applies to any insurance company that is required
to discount estimated salvage recoverable under § 832.

SECTION 3. DISCOUNT FACTORS FOR THE 2020 ACCIDENT YEAR

.01 The tables in this section 3 present separately for each line of business the
discount factors for losses incurred in the 2020 accident year for use by insurance
companies in computing discounted unpaid losses under § 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 2020 under § 846(c), which is 3.08
percent, compounded semiannually, and the payment patterns for the 2017
determination year determined by the Secretary under § 846(d). 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 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 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 2020 in Short-Tail Lines of Business

Taxable Year
Beginning in
Auto Physical
Damage Fidelity/Surety
Financial
Guaranty/
Mortgage
Guaranty International Other*

2020 98.3139 95.8052 95.5582 96.1310 96.9677

2021 97.0010 97.0010 97.0010 97.0010 97.0010

Taxpayer Not Using Composite Method

Years after 2021 98.4834 98.4834 98.4834 98.4834 98.4834

Taxpayer Using the Composite Method

2022 98.4834 98.4834 98.4834 98.4834 98.4834

Years after 2022 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 2020 is 98.4834 percent. For later years, the discount factor for losses incurred
in 2020 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 2020 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

2020 95.4035 94.6016 96.1125 97.3985 98.1106 96.8566
2021 97.0010 97.0010 97.0010 97.0010 97.0010 97.0010

Taxpayer Not Using Composite Method
Years
after 2021 98.4834 98.4834 98.4834 98.4834 98.4834 98.4834

Taxpayer Using the Composite Method
2022 98.4834 98.4834 98.4834 98.4834 98.4834 98.4834
Years
after 2022 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 2 (part A)
Discount Factors Under Section 846 (percent)
For Losses Incurred in Accident Year 2020 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

2020 93.7894 91.2887 86.3302 95.0975 90.4958 88.9133
2021 94.5252 92.3148 88.4733 93.3939 91.3319 89.7843
2022 95.0694 92.5421 90.0641 93.7004 91.8577 90.3548
2023 95.1096 92.8346 91.4580 92.9075 91.9007 90.5269
2024 94.9861 92.9813 92.4445 91.0317 91.7488 90.2789
2025 94.8262 93.0034 93.2158 91.2360 92.2753 90.3502
2026 95.1140 93.9822 94.0622 90.9324 92.7671 90.3726
2027 94.7512 94.9071 94.7714 90.6175 93.5594 91.6265
2028 96.2444 95.8327 95.9435 93.2279 94.6947 92.2914
2029 98.2817 97.6457 97.6874 94.6187 96.5347 94.2474

Taxpayer Not Using Composite Method
2030 98.4834 98.4834 98.4834 96.0142 97.9102 95.6606
2031 98.4834 98.4834 98.4834 97.3886 98.4834 97.0886
Years
after 2031 98.4834 98.4834 98.4834 98.4834 98.4834 98.4834

Taxpayer Using the Composite Method
2030 98.4834 98.4834 98.4834 96.7819 98.0023 96.5869
Years
after 2030 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 2 (part B)

Discount Factors Under Section 846 (percent)

For Losses Incurred in Accident Year 2020 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

2020 95.4796 85.3166 87.3013 87.5556 92.4450

2021 95.0805 85.7949 88.6772 85.9962 91.3753

2022 95.0391 87.6480 89.4512 84.8651 91.0823

2023 94.6635 83.1315 90.8125 83.3180 89.8805

2024 93.9744 84.4598 89.4430 82.7387 88.2753

2025 94.0255 85.8393 89.4917 82.1898 88.1551

2026 94.2730 87.2786 90.4502 82.5646 88.1342

2027 94.8300 88.5618 91.4434 83.4400 88.6931

2028 95.4472 89.8703 91.8491 84.0701 89.9615

2029 97.6225 91.2045 94.1596 86.0229 91.7954

Taxpayer Not Using Composite Method

2030 98.4834 92.5645 95.5800 87.2812 93.1592

2031 98.4834 93.9501 97.0253 88.5644 94.5437

2032 98.4834 95.3597 98.4834 89.8730 95.9411

2033 98.4834 96.7878 98.4834 91.2073 97.3233

2034 98.4834 98.2068 98.4834 92.5675 98.4834

2035 98.4834 98.4834 98.4834 93.9532 98.4834

2036 98.4834 98.4834 98.4834 95.3630 98.4834

2037 98.4834 98.4834 98.4834 96.7916 98.4834

2038 98.4834 98.4834 98.4834 98.2114 98.4834

Years after 2038 98.4834 98.4834 98.4834 98.4834 98.4834

Taxpayer Using the Composite Method

2030 98.4834 94.5507 96.5457 91.0641 94.9230

Years after 2030 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 4. DISCOUNT FACTORS FOR TAXABLE YEARS BEGINNING IN 2020
.01 The tables in this section 4 present separately for each line of business
discount factors for losses incurred in the 2020 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 2020. The
discount factors for losses incurred in accident years 2019 and 2020 presented in these
tables are determined by using the applicable interest rate for 2019 (3.09 percent,
compounded semiannually) and 2020 (3.08 percent, compounded semiannually),
respectively, under § 846(c). 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 § 846(d) and by assuming all loss payments occur in the middle
of the calendar year. See Rev. Proc. 2019-31 (prescribing discount factors for the 2019
accident year and “Revised Discount Factors” for accident years beginning before 2019).
.02 Table 4 separately provides 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 2020

Short-Tail Lines of Business

Accident Year
Auto Physical
Damage Fidelity/Surety
Financial
Guaranty/
Mortgage
Guaranty International Other*

2020 98.3139 95.8052 95.5582 96.1310 96.9677

2019 96.9916 96.9916 96.9916 96.9916 96.9916

Years before 2019 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 2020 is 98.4834 percent.

Table 3 (part B)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2020
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

2020 95.4035 94.6016 96.1125 97.3985 98.1106 96.8566
2019 96.9916 96.9916 96.9916 96.9916 96.9916 96.9916
Years
before
2019 98.5513 98.5513 98.5513 98.5513 98.5513 98.5513

Table 4 (part A)
Discount Factors Under Section 846 (percent)
For Taxable Year(s) Beginning in 2020
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

2020 93.7894 91.2887 86.3302 95.0975 90.4958 88.9133
2019 94.5084 92.2917 88.4392 93.3741 91.3061 89.7544
2018 95.2819 92.8576 90.4811 93.9651 92.1992 90.7535
2017 95.3204 93.1388 91.8194 93.2041 92.2415 90.9196
2016 95.2024 93.2805 92.7664 91.4064 92.0976 90.6836
2015 95.0498 93.3035 93.5069 91.6039 92.6040 90.7542
2014 95.3260 94.2423 94.3189 91.3154 93.0770 90.7788
2013 94.9804 95.1291 94.9993 91.0177 93.8378 91.9830
2012 96.4102 96.0160 96.1220 93.5200 94.9264 92.6228
2011 98.3585 97.7503 97.7902 94.8530 96.6876 94.4974

Taxpayer Not Using the Composite Method
2010 98.5513 98.5513 98.5513 96.1895 98.0033 95.8511
2009 98.5513 98.5513 98.5513 97.5045 98.5513 97.2176
Years
before
2009 98.5513 98.5513 98.5513 98.5513 98.5513 98.5513

Taxpayer Using the Composite Method
Years
before
2011 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 2020

Long-Tail Lines of Business

Accident Year
Private
Passenger
Auto Liability/
Medical
Products
Liability -
Claims-Made
Products
Liability -
Occurrence
Workers'
Compensation
Long-Tail
Composite

2020 95.4796 85.3166 87.3013 87.5556 92.4450

2019 95.0654 85.7548 88.6442 85.9577 91.3501

2018 95.2520 88.1407 89.8860 85.4517 91.4469

2017 94.8920 83.8076 91.1924 83.9662 90.2933

2016 94.2325 85.0889 89.8810 83.4129 88.7546

2015 94.2824 86.4184 89.9309 82.8905 88.6421

2014 94.5205 87.8040 90.8527 83.2567 88.6258

2013 95.0550 89.0388 91.8072 84.1036 89.1661

2012 95.6473 90.2969 92.1992 84.7150 90.3858

2011 97.7282 91.5785 94.4133 86.5946 92.1457

Taxpayer Not Using the Composite Method

2010 98.5513 92.8838 95.7739 87.8065 93.4541

2009 98.5513 94.2124 97.1571 89.0414 94.7812

2008 98.5513 95.5629 98.5513 90.2995 96.1195

2007 98.5513 96.9299 98.5513 91.5813 97.4421

2006 98.5513 98.2868 98.5513 92.8867 98.5513

2005 98.5513 98.5513 98.5513 94.2154 98.5513

2004 98.5513 98.5513 98.5513 95.5661 98.5513

2003 98.5513 98.5513 98.5513 96.9334 98.5513

2002 98.5513 98.5513 98.5513 98.2913 98.5513

Years before 2002 98.5513 98.5513 98.5513 98.5513 98.5513

Taxpayer Using the Composite Method

Years before 2011 98.5513 94.7288 96.6903 91.2579 95.0968

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is Megan McGuire of the Office of
Associate Chief Counsel (Financial Institutions & Products). For further information

regarding this revenue procedure contact Ms. McGuire at (202) 317-6995 (not a toll-free
call).