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 ta

bles 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 88100. 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 § 1.8461(b)(2) are not set forth in tables, but are equivalent to the “Short-Tail Composite” discount factors.

Bulletin No. 2020–49 1459 November 30, 2020

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

Reinsurance - Nonproportional

Assumed

Reinsurance - Nonproportional

Assumed Property

Special Property (Fire, Allied Lines,

Earthquake, Burglary & Theft) Warranty

Inland Marine,

Year Beginning

Reinsurance - Nonproportional

Assumed Financial Lines

Assumed Assumed Assumed Earthquake, Short-Tail

in Financial Lines Liability Property Burglary & Theft) Warranty 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

Liability

in

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 specifed taxable year.

November 30, 2020 1460 Bulletin No. 2020–49

Table 2 (part A) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2020 in Long-Tail Lines of Business

Medical Professional

Liability - Occurrence

Multiple Peril

Commercial Professional Professional Other Other

Auto/Truck Liability - Liability - Multiple Peril Liability - Liability - Liability/Medical Claims-Made Occurrence Lines Claims-Made 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

Taxable Year

Beginning in

Auto/Truck Liability/Medical

Commercial

Medical Professional

Liability - Claims-Made

Lines

Other Liability - Claims-Made

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 specifed taxable year.*

Bulletin No. 2020–49 1461 November 30, 2020

Table 2 (part B) Discount Factors Under Section 846 (percent) For Losses Incurred in Accident Year 2020 in Long-Tail Lines of Business

Products Liability - Claims-Made

Products Liability - Occurrence

Workers' Compensation

Taxable Year

Beginning in

Auto Liability/ Liability - Liability - Workers' Long-Tail

Medical Claims-Made Occurrence Compensation 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

Private Passenger Auto Liability/

Medical

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 specifed taxable year.*