26 C.F.R. § 1.846-2 Election by taxpayer to use its own historical loss payment pattern.
Title 26 - Internal Revenue
(a) In general. If a taxpayer has one or more eligible lines of business in a determination year, the taxpayer may elect on the taxpayer's timely filed Federal income tax return for the determination year to discount unpaid losses using its own historical loss payment pattern instead of the industry-wide pattern determined by the Secretary. A taxpayer making the election must use its own historical loss payment pattern in discounting unpaid losses for each line of business that is an eligible line of business in that determination year. The election applies to accident years ending with the determination year and to each of the four succeeding accident years. If a taxpayer makes the election for the 1987 determination year, the taxpayer must use its 1987 loss payment pattern (determined by reference to its 1985 annual statement) to discount unpaid losses attributable to all accident years prior to 1988. (b) Eligible line of business—(1) In general. A line of business is an eligible line of business in a determination year if, on the most recent annual statement filed by the taxpayer before the beginning of that determination year, the taxpayer reports losses and loss expenses incurred (in Schedule P, part 1, column 24 of the 1990 annual statement or comparable location in an earlier or subsequently revised blank) for at least the number of accident years for which losses and loss expenses incurred for that line of business are required to be separately reported on that annual statement. For example, for the 1987 determination year, the 1985 annual statement is used. The annual statement to be used to determine eligibility in subsequent determination years is the annual statement for each fifth year after 1985 (e.g., 1990, 1995, etc.). (2) Other published guidance. A line of business is also an eligible line of business for purposes of the election if the line is an eligible line under requirements published for this purpose in the Internal Revenue Bulletin. (3) Special rule for 1987 determination year. A line of business is an eligible line of business in the 1987 determination year if it is eligible under paragraph (b) (1) or (2) of this section, or if on the most recent annual statement filed by the taxpayer before the beginning of the 1987 determination year, the taxpayer reports written premiums for the line of business for at least the number of accident years that unpaid losses for that line of business are required to be separately reported on that annual statement. (c) Anti-abuse rule. To prevent avoidance of the requirement that the election to use historical loss payment patterns apply to all eligible lines of business of a taxpayer, the district director may— (1) Nullify a taxpayer's election to compute discounted unpaid losses based on its historical loss payment pattern; (2) Adjust a taxpayer's historical loss payment pattern; or (3) Make other proper adjustments. (d) Effect of section 338 election on section 846(e) election. [Reserved] For further guidance, see §1.846–2T(d). [T.D. 8433, 57 FR 40845, Sept. 8, 1992, as amended by T.D. 9257, 71 FR 18005, Apr. 10, 2006]
Title 26: Internal Revenue
PART 1—INCOME TAXES
Other Insurance Companies
§ 1.846-2 Election by taxpayer to use its own historical loss payment pattern.
