IRDAI may allow phased Ind AS rollout amid earnings volatility concerns

Insurers are also dealing with other regulatory changes, including risk-based capital (RBC) norms, adding to execution complexity.

• IRDAI proposes Ind AS adoption for insurers by April 2026.
• Insurers warn of earnings volatility and seek phased transition.
• Profit recognition will shift to gradual reporting under Ind AS.

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India’s insurance regulator is likely to consider a phased transition to Indian Accounting Standards (Ind AS), even as it proposes an April 1, 2026 deadline, with insurers and analysts warning of volatility in reported earnings under the new framework, multiple people aware of the discussions told Moneycontrol.

The Insurance Regulatory and Development Authority of India recently issued a consultation paper proposing mandatory adoption of Ind AS, aligned with global IFRS norms, across life, general, health insurers and reinsurers.

While the move aims to improve transparency and comparability, it significantly changes how insurers recognise profits, making near-term earnings less predictable.

“On paper, April 2026 looks achievable, but companies would prefer at least two years of parallel disclosures for stability,” said a senior executive at a private life insurer.

Queries sent to IRDAI remained unanswered.

Parallel reporting likely

The regulator has indicated openness to transitional measures, including parallel reporting in the initial phase. Insurers may be required to publish Ind AS numbers alongside Indian GAAP filings, though industry participants say this may not be sufficient.

“Global markets that adopted IFRS 17 had longer transition periods. India should allow a smoother glide path for investor education and system readiness,” said the CFO of a listed insurer.

Insurers are also dealing with other regulatory changes, including risk-based capital (RBC) norms, adding to execution complexity. Consultants flagged challenges such as system upgrades, actuarial recalibration and talent shortages, particularly actuaries.

Brokerages flag challenges

Recent reports by Motilal Oswal Financial Services highlight that the shift could materially alter key metrics, especially for life insurers with long-duration and participating products.

Metrics like embedded value and new business margins may lose relevance, with contractual service margin (CSM) emerging as the core profitability indicator. “Valuations could see some disconnect as markets adjust to the new reporting framework,” said an analyst.

Profit recognition to change

At the core of the transition is a shift in profit recognition.

Under Ind AS, revenue will be recognised over the life of a policy rather than upfront. This introduces changes such as: CSM becoming the primary profitability metric, acquisition costs being spread over the policy term, and participating income recognised gradually.

"CSM may replace traditional metrics, but markets will take time to understand it,” said another analyst.

Short-term volatility, long-term gains

Analysts expect near-term earnings volatility, especially for insurers that currently recognise profits upfront. “Earnings will be deferred for some companies, while others may see smoother reporting over time,” they said.

However, the shift is expected to improve disclosure quality and align Indian insurers with global peers. “This is less about changing the business and more about changing how it is measured,” another analyst said.

What next

The regulator has invited feedback on the proposal, with the final framework expected to address concerns around timelines and implementation.

"The direction is clear. India will move to IFRS-aligned reporting. The question is how smooth the transition will be," an industry executive said.

"If a phased rollout is allowed, insurers get breathing room. If not, the sector may face a period of earnings noise," the executive added.