The Internal Revenue Service (IRS) issued Rev. Proc. 2023-41 prescribing discount factors for the 2023 accident year. Insurance companies are to use the factors published in Rev. Proc. 2023-41 to discount their unpaid losses under IRC § 846 and discounted estimated salvage recoverable under IRC § 832.
The 2023 factors were determined by using the 2023 applicable interest rate of 2.9%, compounded semiannually. Rev. Proc. 2023-41 also summarizes the previously issued discounted factors for accident years beginning before 2023 (located in Rev. Proc. 2023-10).
Subchapter L of the Internal Revenue Code (“IRC”) provides for the computation of taxable income for insurance companies under IRC Section 832, which defines “underwriting income” as premiums earned less losses and expenses incurred. In calculating the applicable loss deduction, IRC Section 832 requires discounting the income statement impact of an insurance company’s change in its balance sheet liability for unpaid losses.
Proper application of Rev. Proc. 2023-41 and Subchapter L is crucial to managing a life and non-life insurance company’s financial position relative to its tax circumstances. If you have any questions or need further clarification, please contact your MarksNelson advisor.
