Industry Insights

Loss Reserve Discount Factor

December 2016
Author:  Matt Scheible

Matt Scheible



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St. Louis

The IRS recently released the annual revenue procedures that provide 2016 accident-year discounting factors for loss reserves and anticipated salvage and subrogation. The procedures also include the discount rate used to compute 2016 accident-year factors under the company factor election.

For companies that previously elected to compute tax loss reserves using the company factor, the applicable interest rate under Internal Revenue Code Section 846(c) is 1.56 percent for the 2016 accident year based on claims development in the 2014 annual statement.

Revenue Procedure (Rev. Proc.) 2016-58 provides the detail discount factors for each line of business for loss reserves. The salvage and subrogation factors are found in Rev. Proc. 2016-59.

If you have questions about loss reserve or salvage and subrogation discounting, contact your BKD advisor.

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