SECTION 3. APPLICATION

.01 Insurance companies are permitted to use the method of section V of Notice 88–100 (the composite method) to compute discounted unpaid losses with respect to accident years not separately reported on the NAIC annual statement. Beginning in 2002, the Secretary will publish composite discount factors for use by insurance companies who use the composite method and have not elected under § 846(e) to use their historical payment patterns. These factors will be published annually along with the Secretary’s tables containing the § 846 loss payment patterns and discount factors and the § 832 salvage discount factors. Insurance companies that have elected under § 846(e) to use their historical payment patterns should apply the composite method based on their historical payment patterns.

.02 Insurance companies that do not use a composite method described in section 3.01 should instead use the discount factors for the appropriate year in the Secretary’s table for the appropriate line of business. If insurance companies have unpaid losses relating to an accident year that is older than the last accident year for which a discount factor is presented in the Secretary’s table, those unpaid losses should be discounted using the factor for the last accident year in the Secretary’s table. Insurance companies that have elected under § 846(e) to use their historical payment patterns should compute the appropriate discount factors in accordance with § 846(e) based on their historical payment patterns.

.03 An insurance company using a method provided in section 3.01 or a method provided in section 3.02 to compute discounted unpaid losses, must use the same method to compute discounted estimated salvage recoverable.