Internal Revenue Bulletin:  2013-49 

December 2, 2013 

Rev. Proc. 2013–37


SECTION 1. PURPOSE

This revenue procedure prescribes the salvage discount factors for the 2013 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 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. TABLES OF DISCOUNT FACTORS

.01 The following tables present separately for each line of business the discount factors under § 832 for the 2013 accident year. All the discount factors presented in this section were determined using the applicable interest rate under § 846(c) for 2013, which is 2.16 percent, and by assuming all estimated salvage is recovered in the middle of the calendar year.

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

.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. Rev. Proc. 2002–74 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 therein.

.04 Tables.

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 98.9372 percent to discount salvage recoverable with respect to losses incurred in this line of business in the 2013 accident year as of the end of the 2013 and later taxable years.

Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount all salvage recoverable in this line of business as of the end of the 2013 taxable year.

Auto Physical Damage

  Discount Factors
Tax Year (%)
2013 98.4882
2014 97.8913
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Commercial Auto/Truck Liability/Medical

  Discount Factors
Tax Year (%)
2013 96.0918
2014 95.6766
2015 96.0149
2016 95.5121
2017 95.9064
2018 95.6648
2019 92.3932
2020 91.0203
2021 93.1830
2022 94.1559
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 2013 accident year.
2023 95.1400
2024 96.1331
2025 97.1298
2026 98.1108
2027 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 95.0296 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Composite

  Discount Factors
Tax Year (%)
2013 95.8312
2014 95.6601
2015 95.8323
2016 94.6468
2017 95.0231
2018 94.6757
2019 94.5640
2020 95.0764
2021 95.0903
2022 96.0842
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 2013 accident year.
2023 97.0831
2024 98.0706
2025 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 97.2205 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Fidelity/Surety

  Discount Factors
Tax Year (%)
2013 96.6294
2014 97.8913
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Financial Guaranty/Mortgage Guaranty

  Discount Factors
Tax Year (%)
2013 96.2442
2014 97.8913
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

International (Composite)

  Discount Factors
Tax Year (%)
2013 95.8312
2014 95.6601
2015 95.8323
2016 94.6468
2017 95.0231
2018 94.6757
2019 94.5640
2020 95.0764
2021 95.0903
2022 96.0842
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 2013 accident year.
2023 97.0831
2024 98.0706
2025 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 97.2205 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Medical Professional Liability — Claims-Made

  Discount Factors
Tax Year (%)
2013 95.2786
2014 95.9565
2015 94.0862
2016 96.2641
2017 96.4417
2018 96.8118
2019 97.5213
2020 98.0020
2021 97.9851
2022 98.9372
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Medical Professional Liability — Occurrence

  Discount Factors
Tax Year (%)
2013 95.7712
2014 97.3870
2015 96.9618
2016 97.9399
2017 97.1545
2018 98.2412
2019 97.7408
2020 97.8032
2021 96.3820
2022 97.3760
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 2013 accident year.
2023 98.3399
2024 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.3944 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Miscellaneous Casualty

  Discount Factors
Tax Year (%)
2013 97.1217
2014 97.8913
   
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Multiple Peril Lines (Homeowners/Farmowners, Commercial Multiple Peril, and Special Liability (Ocean Marine, Aircraft (All Perils), Boiler and Machinery))

  Discount Factors
Tax Year (%)
2013 96.3826
2014 96.3451
2015 96.7517
2016 95.2517
2017 96.4850
2018 96.8610
2019 96.9777
2020 96.8985
2021 96.6327
2022 98.9372
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Other (Including Credit)

  Discount Factors
Tax Year (%)
2013 97.6897
2014 97.8913
   
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Other Liability — Claims-Made

  Discount Factors
Tax Year (%)
2013 95.1076
2014 95.4013
2015 95.4350
2016 96.3406
2017 96.3743
2018 96.5027
2019 97.3792
2020 97.3555
2021 97.5726
2022 98.5464
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Other Liability — Occurrence

  Discount Factors
Tax Year (%)
2013 92.6226
2014 93.5130
2015 94.4491
2016 94.9634
2017 95.5708
2018 96.4140
2019 96.5549
2020 96.4769
2021 97.9444
2022 98.9372
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Private Passenger Auto Liability/Medical

  Discount Factors
Tax Year (%)
2013 97.0706
2014 96.9687
2015 96.9501
2016 96.4757
2017 96.4634
2018 96.5763
2019 96.3892
2020 96.6383
2021 97.6225
2022 98.6028
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Products Liability — Claims-Made

  Discount Factors
Tax Year (%)
2013 92.2286
2014 93.4576
2015 92.0267
2016 96.2215
2017 94.6124
2018 98.6304
2019 97.2433
2020 88.9465
2021 98.6843
2022 98.9372
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 2013 accident year.
2023 and later years 98.9372
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 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Products Liability — Occurrence

  Discount Factors
Tax Year (%)
2013 92.9273
2014 92.9980
2015 93.6660
2016 94.6880
2017 95.1420
2018 95.8302
2019 95.7694
2020 97.5022
2021 97.0413
2022 98.0355
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Reinsurance — Nonproportional Assumed Property

  Discount Factors
Tax Year (%)
2013 94.5748
2014 96.3787
2015 94.7317
2016 93.7440
2017 95.4876
2018 94.6692
2019 97.6860
2020 92.4794
2021 96.9357
2022 97.9499
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 96.4869 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Reinsurance — Nonproportional Assumed Liability

  Discount Factors
Tax Year (%)
2013 90.3595
2014 92.1774
2015 87.9515
2016 88.9859
2017 93.5912
2018 95.9635
2019 95.3061
2020 95.7404
2021 94.3801
2022 97.4575
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 2013 accident year.
2023 98.4227
2024 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.4548 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Reinsurance — Nonproportional Assumed Financial Lines

  Discount Factors
Tax Year (%)
2013 91.0140
2014 92.3376
2015 95.1527
2016 95.2554
2017 96.3242
2018 94.8469
2019 96.3368
2020 96.2848
2021 98.7677
2022 98.9372
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 2013 accident year.
2023 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

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

  Discount Factors
Tax Year (%)
2013 97.2489
2014 97.8913
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Warranty

  Discount Factors
Tax Year (%)
2013 96.8834
2014 97.8913
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 2013 accident year.
2015 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 98.9372 percent to discount salvage recoverable as of the end of the 2015 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

Workers’ Compensation

  Discount Factors
Tax Year (%)
2013 93.4664
2014 94.6736
2015 95.3195
2016 94.1675
2017 93.6989
2018 93.1688
2019 93.6398
2020 94.7487
2021 94.9592
2022 95.9566
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 2013 accident year.
2023 96.9634
2024 97.9719
2025 and later years 98.9372
Taxpayers that use the composite method of Notice 88–100 should use 97.2990 percent to discount salvage recoverable as of the end of the 2023 taxable year with respect to losses incurred in this line of business in 2013 and prior years.

SECTION 5. DRAFTING INFORMATION

The principal author of this revenue procedure is David Remus of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Mr. Remus on (202) 622-3970 (not a toll-free call).


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