On February 13, 2025, the Internal Revenue Service (IRS) issued Rev. Proc. 2025-15 prescribing discount factors for the 2024 accident year. Insurance companies should use the factors published in Rev. Proc. 2025-15 to discount their unpaid losses under IRC § 846 and discounted estimated salvage recoverable under IRC § 832.
The 2024 factors were determined by using the 2024 applicable interest rate of 3.18%, compounded semiannually. The Revenue Procedure also summarizes the previously issued discounted factors for accident years beginning before 2024.
Additionally, the Revenue Procedure provides an update on changes by the National Association of Insurance Commissioners (NAIC) to Schedule P of the annual statement. The NAIC added Pet Insurance as a new separate line of business to be reported on Schedule P for the 2024 annual statement. Pet Insurance was previously reported as Inland Marine and discounted using the Special Property line factors. Pet Insurance should continue to use the Special Property line factors but will now be reported separately.
Finally, the IRS is seeking comments related to the composite method for computing discounted unpaid losses for accident years not separately reported on the annual statement. For the 2024 annual statement the NAIC has changed Schedule P to require ten years of data, including a “prior” row, for all lines of business. The IRS is seeking comments on the following:
(1) whether, and the extent to which, insurance companies expect to use composite method discount factors following the NAIC change;
(2) whether insurance companies need the Secretary to continue publishing such composite method discount factors; and,
(3) whether insurance companies require additional guidance regarding the use of the composite method discount factors.
