Internal Revenue Bulletin:  2011-46 

November 14, 2011 

Rev. Proc. 2011-54


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2011 accident year. These factors must be used to compute discounted estimated salvage recoverable under § 832 of the Internal Revenue Code.

SECTION 2. BACKGROUND

Section 832(b)(5)(A) requires that all estimated salvage recoverable (including that which cannot be treated as an asset for state accounting purposes) be taken into account in computing the deduction for losses incurred. Under § 832(b)(5)(A), paid losses are to be reduced by salvage and reinsurance recovered during the taxable year. This amount is adjusted to reflect changes in discounted unpaid losses on nonlife insurance contracts and in unpaid losses on life insurance contracts. An adjustment is then made to reflect any changes in discounted estimated salvage recoverable and in reinsurance recoverable.

Pursuant to § 832(b), the amount of estimated salvage is determined on a discounted basis in accordance with procedures established by the Secretary.

SECTION 3. SCOPE

This revenue procedure applies to any taxpayer that is required to discount estimated salvage recoverable under § 832.

SECTION 4. APPLICATION

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2011 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2011, which is 3.46 percent, and by assuming all estimated salvage is recovered in the middle of each calendar year. See Rev. Proc. 2008-11, 2008-1 C.B. 301, for background regarding the tables.

.02 These tables must be used by taxpayers irrespective of whether they elected to discount unpaid losses using their own historical experience under § 846.

.03 Section V of Notice 88-100, 1988-2 C.B. 439, provides a composite discount factor to be used in determining the discounted unpaid losses for accident years that are not separately reported on the annual statement approved by the National Association of Insurance Commissioners. The tables separately provide discount factors for taxpayers who elect to use the composite method. Rev. Proc. 2002-74, 2002-2 C.B. 980, clarifies that for certain insurance companies subject to tax under § 831 the composite method for discounting unpaid losses set forth in Notice 88-100, section V, is permitted but not required. This revenue procedure further provides alternative methods for computing discounted unpaid losses that are permitted for insurance companies not using the composite method, and sets forth a procedure for insurance companies to obtain automatic consent of the Commissioner to change to one of the methods described in Rev. Proc. 2002-74.

.04 Tables.

Tables of Factors to be Used to DiscountSalvage Recoverable With Respect to Losses Incurred inAccident Year 2011
(Interest rate: 3.46 percent)
Lines of Business
Accident and Health (Other Than Disability Income or Credit Disability Insurance)
Taxpayers that do not use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2011 accident year as of the end of the 2011 and later taxable years.
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount all salvage recoverable in this line of business as of the end of the 2011 taxable year.
Auto Physical Damage
Tax Year Discount Factors (%)
   
2011 97.6275
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Commercial Auto/Truck Liability/Medical
Tax Year Discount Factors (%)
   
2011 93.3955
2012 93.3497
2013 93.6495
2014 93.9535
2015 94.5922
2016 94.4105
2017 93.0655
2018 93.8651
2019 96.7732
2020 98.3136
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Composite
Tax Year Discount Factors (%)
   
2011 93.4039
2012 93.1846
2013 93.0306
2014 92.8794
2015 92.3429
2016 91.5493
2017 92.2931
2018 93.4656
2019 95.2188
2020 96.7927
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Fidelity/Surety
Tax Year Discount Factors (%)
   
2011 94.5806
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Financial Guaranty/Mortgage Guaranty
Tax Year Discount Factors (%)
   
2011 95.4821
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
International (Composite)
Tax Year Discount Factors (%)
   
2011 93.4039
2012 93.1846
2013 93.0306
2014 92.8794
2015 92.3429
2016 91.5493
2017 92.2931
2018 93.4656
2019 95.2188
2020 96.7927
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Medical Malpractice — Claims-Made
Tax Year Discount Factors (%)
   
2011 93.6663
2012 94.5958
2013 93.2150
2014 93.7553
2015 93.1492
2016 89.3501
2017 86.4691
2018 91.6464
2019 96.9508
2020 98.3136
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Medical Malpractice — Occurrence
Tax Year Discount Factors (%)
   
2011 87.4530
2012 91.2904
2013 93.3358
2014 86.4191
2015 95.5109
2016 92.6085
2017 93.9918
2018 96.4593
2019 97.5134
2020 98.3136
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Miscellaneous Casualty
Tax Year Discount Factors (%)
   
2011 97.0682
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))
Tax Year Discount Factors (%)
   
2011 93.9591
2012 93.4315
2013 93.3624
2014 93.3066
2015 92.6060
2016 91.2535
2017 92.2618
2018 94.3624
2019 95.5747
2020 97.0967
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Other (Including Credit)
Tax Year Discount Factors (%)
   
2011 96.2595
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Other Liability — Claims-Made
Tax Year Discount Factors (%)
   
2011 89.9640
2012 90.9400
2013 89.3209
2014 92.1248
2015 93.4120
2016 95.0362
2017 94.1167
2018 92.9293
2019 97.7390
2020 98.3136
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Other Liability — Occurrence
Tax Year Discount Factors (%)
   
2011 88.8323
2012 89.7443
2013 91.7691
2014 92.4298
2015 91.9481
2016 92.0560
2017 91.6100
2018 93.9815
2019 96.3629
2020 97.9202
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Private Passenger Auto Liability/Medical
Tax Year Discount Factors (%)
   
2011 95.2907
2012 95.3106
2013 95.0938
2014 94.3448
2015 93.8406
2016 93.1778
2017 93.9588
2018 95.3067
2019 95.3731
2020 96.9202
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Products Liability — Claims-Made
Tax Year Discount Factors (%)
   
2011 90.3287
2012 57.4781
2013 59.7457
2014 91.9244
2015 82.7270
2016 92.5554
2017 64.8394
2018 91.7750
2019 92.7747
2020 93.7745
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 95.3256
2022 96.8802
2023 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 96.1358 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Products Liability — Occurrence
Tax Year Discount Factors (%)
   
2011 89.2922
2012 91.1086
2013 92.7443
2014 93.4548
2015 93.8417
2016 91.7263
2017 92.2857
2018 94.8423
2019 95.0804
2020 96.6835
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Reinsurance — Nonproportional Assumed Property
Tax Year Discount Factors (%)
   
2011 92.3051
2012 93.7306
2013 96.2743
2014 82.6967
2015 91.1729
2016 83.9159
2017 57.7951
2018 93.7915
2019 76.8594
2020 89.7124
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 91.2427
2022 92.8279
2023 94.4867
2024 96.2644
2025 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 93.2014 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Reinsurance — Nonproportional Assumed Liability
Tax Year Discount Factors (%)
   
2011 88.5261
2012 91.3783
2013 92.6425
2014 90.1633
2015 91.9672
2016 92.7246
2017 92.6419
2018 94.1716
2019 95.8463
2020 97.3545
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Reinsurance — Nonproportional Assumed Financial Lines
Tax Year Discount Factors (%)
   
2011 88.8405
2012 87.7511
2013 91.2356
2014 81.3485
2015 91.5590
2016 82.9553
2017 91.7407
2018 92.1114
2019 97.8713
2020 98.3136
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Special Property (Fire, Allied Lines, Inland Marine, Earthquake, Glass, Burglary and Theft)
Tax Year Discount Factors (%)
   
2011 95.6046
2012 96.6697
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factor to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2013 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 98.3136 percent to discount salvage recoverable as of the end of the 2013 taxable year with respect to losses incurred in this line of business in 2011 and prior years.
Workers’ Compensation
Tax Year Discount Factors (%)
   
2011 89.9261
2012 91.7002
2013 92.3933
2014 92.3172
2015 91.0146
2016 89.7934
2017 90.3201
2018 90.0878
2019 91.9867
2020 93.5222
   
Taxpayers that do not use the composite method of Notice 88-100 should use the following factors to discount salvage recoverable as of the end of the tax year shown with respect to losses incurred in this line of business in the 2011 accident year.
   
2021 95.0909
2022 96.6917
2023 and later years 98.3136
   
Taxpayers that use the composite method of Notice 88-100 should use 96.0008 percent to discount salvage recoverable as of the end of the 2021 taxable year with respect to losses incurred in this line of business in 2011 and prior years.

DRAFTING INFORMATION

The principal author of this revenue procedure is Sarah E. Swan of the Office of the Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure, contact Ms. Swan at (202) 622-8443 (not a toll free call).


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