IRS Releases Updated Discount Factors for the 2024 Accident Year

The IRS has released Revenue Procedure 2025-15, updating discount factors that insurance companies must use when calculating unpaid losses and salvage recoverables for the 2024 accident year. These updates impact tax reporting, compliance, and planning for insurers. The guidance also includes discount factors for 2023 and prior accident years, applicable to tax years beginning in 2024.

Key Changes in IRS Revenue Procedure 2025-15

The changes in Revenue Procedure 2025-15 affect how insurers calculate discounted unpaid losses under § 846 of the Internal Revenue Code and discounted estimated salvage recoverable under § 832, apply the composite method under existing and new guidelines, and report certain lines of business. Some of the key updates taking effect include:

• New Discount Factors for 2024: The IRS has set new discount factors for unpaid losses and salvage recoverables in the 2024 accident year, calculated using an interest rate of 3.18%, compounded semiannually.

• New Reporting Requirements May Reduce Use of the Composite Method: The National Association of Insurance Commissioners (NAIC) now requires insurers to report ten years of data in Schedule P, including a "prior" row for all lines of business. As a result, fewer companies may need the composite method for discount factors. The IRS is seeking industry input on whether these factors should still be published.

• Pet Insurance Now Reported Separately: Pet Insurance will now be listed as its own category in Schedule P of the annual statement, rather than being grouped under Inland Marine. While it will still use Special Property discount factors, this change improves reporting accuracy.

For a complete list of discount factors, calculation methods, and any additional updates, refer to IRS Revenue Procedure 2025-15.

Stay Compliant with Expert Guidance

Understanding and applying the guidelines in Revenue Procedure 2025-15 is crucial for accurate tax reporting and compliance in the 2024 taxable year. If you need clarification on how these changes affect your business, contact your CRI advisor. Our team is ready to provide expert guidance and tailored solutions to keep your company compliant and prepared.