Tax
12 Days of SSAP: IRS Again Updates Loss Reserve Discounting
Hot Take:
As the holidays approach, JLK Rosenberger is taking a new perspective on a holiday classic – the Twelve Days of Christmas. Rather than filling your head with turtle doves and gold rings, we are focusing on the latest changes to statutory accounting and tax changes and how they will impact your insurance company in 2020 and beyond.
This article covers the latest on insurance loss reserve discounting.
Full Article
Back in July, just when we thought the IRS had finalized their loss reserve discounting templates, they issued final regulations under IRC Section 846 and two accompanying revenue procedures providing additional guidance and revised discount factors.
Revenue Procedure 2019-30 waives the requirement to file a Form 3115 when an insurer changes its method of accounting for discounting 1) unpaid losses and expenses, 2) estimated salvage recoverable and 3) unearned premiums attributable to title insurance, in order to comply with IRC Section 846, as amended by the Tax Cuts and Jobs Act. Revenue Procedure 2019-31 provides revised discount factors to be used for the 2019, 2018 and earlier accident years.
The most significant difference between the proposed and final regulations is that the annual rate determined under the proposed regulations was 3.12 percent, whereas the annual rate determined under the final regulations is 2.94 percent.
You can read more details in our original SSAP Chat article here.
