IRDAI proposes adoption of Ind AS for insurers from April 2026. What it means for policyholders

IFRS issued by the International Accounting Standards Board (IASB), provide a globally accepted framework for transparent, consistent, and comparable financial reporting

• IRDAI plans to adopt Ind AS for insurers from April 1, 2026.
• Ind AS aligns Indian insurers with global IFRS standards.
• Policyholders' rights and obligations remain unchanged by Ind AS.

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The Insurance Regulatory and Development Authority of India (IRDAI) has released this Consultation Paper regarding the planned adoption of Indian Accounting Standards (Ind AS) for insurers starting April 1, 2026.

This paper presents the rationale for the transition, the current legal and regulatory framework, international developments in insurance accounting, industry readiness for Ind AS, key policy issues, a proposed implementation plan, transitional arrangements, and necessary regulatory amendments, as outlined in the consulting paper issued by IRDAI.

In India, insurance companies must adhere to strict rules when preparing and presenting their financial statements. These rules are derived from the Insurance Act, 1938, the Companies Act, 2013, and regulations issued by IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024. They specify how insurers should report their finances, estimate future claim liabilities, value their investments, and maintain sufficient funds to stay financially secure. The goal is to assist regulators in monitoring insurers and safeguarding policyholders.

However, in some areas, these rules differ from global accounting standards, particularly in how insurers measure liabilities, record profits, evaluate losses on financial assets, and disclose financial information.

The move would align life insurers, general insurers and reinsurers with a unified global financial reporting framework based on International Financial Reporting Standards (IFRS).

IFRS issued by the International Accounting Standards Board (IASB), provide a globally accepted framework for transparent, consistent, and comparable financial reporting. The insurance sector has undergone significant reform with the introduction of IFRS 17 (Insurance Contracts) and IFRS 9 (Financial Instruments).

“Actuarial liabilities (now called "fulfilment cash flows") will be calculated on a market-consistent basis. Unearned profits will be separately shown as the Contractual Service Margin (CSM), released over the policy duration. This makes profits explicitly visible in the financial statements for the first time — something that was not possible under the earlier regime,” said Bikash Choudhary, CEO of FatakSecure.

Indian Accounting Standards (Ind AS), closely aligned with global IFRS, aim to make financial reporting clearer, more consistent, and easier to compare across companies. Most companies in India already use Ind AS, but insurers still follow older rules under the Insurance Act, 1938, and IRDAI regulations, according to the consulting paper issued by IRDAI.

Transitioning to Ind AS, including new standards for financial instruments and insurance contracts, would align Indian insurers with international practices. This could enhance transparency, financial disclosures, and risk management, while simplifying comparisons for global investors between Indian insurers and their international counterparts.

Since 2022, IRDAI has been preparing the industry for this transition through expert committees, training sessions, system upgrades, and trial financial statements. This demonstrates that insurers are making progress in readiness, as reported in the IRDAI consulting paper.

How will the shift to Ind AS affect policyholders?

The policyholder does not get impacted because of any change in the accounting system of any insurer. “Accordingly, in my views there will be no change in the rights and obligation of any policyholder because of the adoption of Ind AS by the insurers,” said Lokanath P. Kar, Founder ElpeeCo.

Will Ind AS affect product pricing, bonuses and capital requirements?

Ind AS is more of a change in accounting practice of the Insurers, it does not have any impact on the rights and obligations of the Policyholders. Kar said, “One of the significant changes that could be seen will be in the Profit and Loss of the Insurers. As per the new accounting standard and in accordance with the choice that an insurer seeks to exercise, the accounting profit of the insurer undergoes some change, while the economic profit remains largely unchanged.”

“As far as the capital is concerned, the accounting profit shall have an impact on the Available Solvency Margin (ASM). However, in my views, the larger impact on the capital will be driven by adoption of Risk-Based Capital (RBC), which takes into account factors like underwriting, reserving, credit, market and operational risk,” said Kar.

The IRDAI had already floated QIS 1 and QIS 2, which seem to me a little more punitive than the factor-based solvency currently followed.

How will the new standards improve transparency for consumers and investors?

As per the market practice prevailing around the globe, Insurance liabilities are reported on market-based valuation (discounted basis); hence, adoption of IND AS 117 will enhance the comparability of the Indian Insurance industry with Global players. This will, in turn, increase the confidence level of investors as well as consumers.

"Ind AS will deliver a true and fair view of accounts, globally comparable, with subjectivity removed and better risk assessment visible. Crucially, the investment component and insurance services component will be separated, giving a clearer picture of the sources of profits, underwriting profits vs. investment profits, and enabling better performance assessment," said Choudhary.