IRS Loss Reserve Discounting

This paper discusses statutory incurred losses, tax basis incurred losses, and IRS loss reserve discount factors. • Calendar year statutory incurred losses are paid losses plus the change in full value loss reserves from the beginning to the end of the year. • Tax basis incurred losses are paid losses plus the change in the discounted loss and loss adjustment expense reserves from the beginning to the end of the year. • The IRS reserve discount factors are ratios of discounted to undiscounted loss reserves. They are by Schedule P line of business. The actual loss payment pattern for the block of business is not relevant.