India’s insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI), has proposed a major overhaul of the financial reporting framework for insurance companies.
Through an exposure draft proposing amendments to the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2026, the regulator plans to introduce Indian Accounting Standards (Ind AS) for insurers starting 1 April 2026.
The reform aims to improve policyholder protection, transparency, and comparability of financial statements, while aligning India’s insurance accounting with global standards.
Key Highlights
| Aspect | Details |
| Regulator | Insurance Regulatory and Development Authority of India |
| Reform | Adoption of Indian Accounting Standards (Ind AS) |
| Proposed Effective Date | 1 April 2026 |
| Applicable To | Life insurers, general insurers, health insurers, reinsurers |
| Regulation Amended | IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2026 |
| Objective | Improve transparency, global comparability, and financial reporting clarity |
Why IRDAI Proposed the Reform
Currently, insurers prepare financial statements under multiple legal frameworks:
| Existing Legal Framework | Purpose |
| Insurance Act 1938 | Governs insurance operations |
| Companies Act 2013 | Corporate financial reporting |
| IRDAI Regulations | Sector-specific reporting rules |
However, this framework differs from global accounting standards in areas such as:
- Liability measurement
- Profit recognition
- Financial asset impairment
- Disclosure practices
The new system will align India’s insurance reporting with global accounting practices.
Migration to Ind AS 117
IRDAI has proposed migration to Ind AS 117 (Insurance). Ind AS 117 is accounting standard for insurance contracts.
| Standard | Global Equivalent |
| Ind AS 117 | Converged with IFRS 17; IFRS 17 is global equivalent standard |
| Previous Global Standard | IFRS 4 |
IFRS 17 replaced IFRS 4 globally from 1 January 2023 to create a consistent principle-based framework for insurance contracts.
Features of New Financial Reporting Framework
The Exposure Draft outlines rules for:
- Recognition of insurance contracts
- Measurement of liabilities
- Presentation of financial statements
- Disclosure of risk and financial information
Key Principles
| Principle | Explanation |
| Market-based valuation | Liabilities valued using discounted future cash flows |
| Transparency | Detailed disclosures of risks and assumptions |
| Comparability | Aligns Indian insurers with global insurance companies |
| Consistency | Uniform reporting across insurers |
Separate Accounting for Insurance and Reinsurance
Under Ind AS 117, insurance and reinsurance contracts must be reported separately.
| Contract Type | Accounting Treatment |
| Insurance contracts | Recognised as liabilities |
| Reinsurance contracts | Recognised as assets (recovery rights from reinsurers) |
Even though both are measured using:
- Future cash flows
- Discounting
- Risk adjustment
- Contractual Service Margin (CSM)
They cannot be netted against each other.
This ensures clear reporting of gross liabilities and risk mitigation through reinsurance.
Preparedness of Insurance Industry
IRDAI began preparing the sector for this transition in 2022.
Key Preparation Steps
| Initiative | Purpose |
| Mission Mode Team | Oversight of implementation |
| Ind AS Expert Committee | Technical guidance |
| Gap Assessments | Evaluate readiness of insurers |
| Capacity Building | Training for accounting and actuarial teams |
| Proforma Financial Statements | Testing Ind AS compliance |
Insurers have already submitted Ind AS-compliant proforma financial statements for:
- FY 2024
- FY 2025 (for many large insurers)
They also upgraded:
- IT systems
- actuarial models
- Contractual Service Margin (CSM) engines
Transitional Reporting Arrangement
During the first year after implementation, insurers will submit two sets of financial statements.
| Reporting Type | Purpose |
| Ind AS financial statements | Statutory reporting |
| IGAAP financial statements | Special-purpose regulatory submission |
This dual reporting will help regulators assess the impact of transition.
Impact on Policyholders
For policyholders, insurance coverage and benefits will remain unchanged.
However, the reform will:
- Improve transparency in financial reporting
- Provide better clarity on insurers’ financial health
- Strengthen trust in insurers’ ability to meet claims
Benefits
| Stakeholder | Benefit |
| Policyholders | Greater confidence in insurers’ financial stability |
| Investors | Better visibility into financial performance |
| Regulators | Improved monitoring of insurer solvency |
What Are Indian Accounting Standards (Ind AS)?
Indian Accounting Standards (Ind AS) are accounting rules notified by the Ministry of Corporate Affairs in 2015.
Key Characteristics
- Converged with global IFRS standards
- Principle-based accounting
- Emphasis on fair value measurement
- Enhanced financial disclosures
History of Accounting Standards in India
| Period | Accounting Framework |
| Before 2015 | Indian GAAP (IGAAP) |
| After 2015 | Ind AS introduced |
Indian GAAP was developed mainly by:
- Institute of Chartered Accountants of India (ICAI)
- Provisions of the Companies Act 1956
Indian GAAP relied largely on historical cost accounting and legal compliance, whereas Ind AS emphasises fair value and global comparability.
Significance of Reform
- Aligns India’s insurance accounting with global financial reporting standards.
- Enhances transparency and comparability of insurer financial statements.
- Improves policyholder protection and trust.
- Enables market-consistent valuation of liabilities.
- Strengthens investor confidence in India’s insurance sector.