Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has proposed the implementation of Indian Accounting Standards (Ind AS), an accounting standard, for all insurers from April 1, 2026. This sets the stage for one of the most significant accounting overhauls in the second in decades.
The deadline will be applicable to all categories of insurers, including life insurers, general insurers, health insurers and reinsurers, the regulator said.
The exposure draft and consultation papers with the proposal follow a notification of Ind AS 117 (Insurance Contracts) in August 2024 and Ind AS 109 (Financial Instruments) earlier by the Ministry of Corporate Affairs.
Together, these standards align Indian financial reporting with global norms under IFRS, particularly IFRS 17. The move aims to bring more transparency and alignment with global standards.
The insurers, currently, prepare financial statements under a regulatory accounting framework prescribed by the Insurance Act, 1938, and IRDAI regulations, even as most listed companies and large non-banking financial companies have already migrated to Ind AS.
Parallel reporting in the transition year
Under the proposed structure, all the insurers – life, general, heath and reinsurers – will adopt Ind AS from FY27. For the first year post-implementation, IRDAI has proposed parallel reporting to smooth the transition. The insurers will submit both Ind AS financial statements (statutory reporting) and IGAAP financial statements (special-purpose regulatory submission). This will facilitate the assessment of the transition impact of Ind AS.
In addition, financial statements in the first year will require independent validation by an auditor from an IRDAI-empanelled panel, over and above the statutory audit requirement.
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Risk-free rate alignment
To ensure consistency, the IRDAI proposes aligning the Risk-Free Rate used under Ind AS with the methodology prescribed for its determination under the proposed Risk-Based Capital framework.
The regulator has also proposed amendments to the Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, including revisions to Schedule II, to align the regulatory architecture with the new accounting regime.
Revision in Regulatory Framework
Upon adoption of Ind AS, insurance contract liabilities will be measured in accordance with Ind AS 117 and financial instruments in accordance with Ind AS 109, while solvency will continue to be determined under the framework prescribed by the Authority.
Accordingly, the existing regulatory framework, including Schedule II of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, requires suitable revision to align with Ind AS. An Exposure Draft proposing the necessary amendments, including the revised formats for Ind AS compliant financial statements, has been prepared and is annexed for stakeholder feedback, the IRDAI said.
Impact on insurance companies
- Profit recognition and balance sheet reporting are likely to change
- Insurers will need new actuarial and financial reporting systems
Alignment with global norms
- IND-AS is broadly aligned with IFRS-17 global insurance accounting standard.
- Brings Indian insurance industry closer to global best practices.
Regulatory reform push
- Step is seen as a major financial reporting reform for insurers
- Expected to improve investor confidence and transparency
