The IRS has issued a revenue procedure containing the discount factors for the 2023 accident year. This discount factor is used by insurance companies to compute discounted unpaid losses and discounted estimated recoverable salvage. (Rev Proc 2023-41, 2023-52 IRB)
The discount factors are contained in four tables. Generally, these discount factors are determined by using the applicable interest rate for 2023 (2.90%). This rate is determined using semi-annual compounding.
However, the discount factors for “long-tail” lines of business are determined using the composite method found in Notice 88-100. All discount factors are determined by assuming that all loss payments occur in the middle of the calendar year.
For more information about discount factors for unpaid losses, see Checkpoint’s Federal Tax Coordinator ¶ E-5565.
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