Irdai proposes April 2026 shift to Ind AS with parallel reporting phase

To smooth the transition, Irdai has proposed parallel reporting under both Ind AS and Indian GAAP during the first year of implementation

The Insurance Regulatory and Development Authority of India (Irdai) on Tuesday issued a consultation paper outlining the proposed transition of insurers to Indian Accounting Standards (Ind AS) from the current Indian Generally Accepted Accounting Principles (Igaap) framework, with implementation slated for April 1.

 

The move aims to align financial reporting for insurers with global best practices under International Financial Reporting Standards (IFRS). 

 

Insurers now follow a regulatory accounting framework prescribed under the Insurance Act, 1938, and Irdai regulations, even as most listed companies and large non-banking financial companies have migrated to Ind AS.

 

Irdai said adopting Ind AS was expected to enhance transparency and global comparability, increasing the attractiveness of Indian insurers to foreign investors and facilitating access to international capital markets.

 

 

To smooth the migration, Irdai has proposed parallel reporting in the first year of implementation. Insurers will submit Ind AS-based financial statements for statutory reporting, alongside Igaap-based statements as special-purpose regulatory submissions.

 

Additionally, the first year of implementation will require independent validation of financial statements by an auditor from an Irdai-empanelled list, beyond the statutory audit.

 

The transition will require amendments to the existing regulatory framework, including Schedule II of the Irdai (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024. 

 

If implemented as proposed, the reform is expected to alter how investors, analysts, rating agencies, and policyholders measure and interpret profitability, risk, and capital strength. Stakeholders have been invited to submit comments and suggestions by March 24.

 

One key issue addressed in the paper relates to segregating funds of policyholders and shareholders. While the Insurance Act mandates separate accounts for policyholders and shareholders, Ind AS and global IFRS practices require financial statements at entity level.

 

Irdai has proposed a middle path. Insurers will prepare primary financial statements — including the balance sheet, the profit-and-loss account, a statement of changes in equity, and a cash-flow statement — at entity level.

 

However, they will continue to maintain a separate revenue account for the policyholder fund, along with detailed schedules to ensure fund-level transparency.

 

On the participating life-insurance business, insurers have sought exemption from the annual cohort requirement under Ind AS 117, citing operational complexity. The regulator declined the request, stating that “annual cohorting” was a core principle designed to prevent cross-subsidisation across generations of policyholders and to ensure timely recognition of profitability trends. 

 

Ind AS 117 is the Indian Accounting Standard on insurance contracts, aligned with IFRS 17.

 

However, Irdai has proposed a calibrated retrospective application — at least 10 years in FY27, 15 years in FY28, and 20 years in FY29 — to ease the operational burden during transition.

 

The regulator said surplus distribution in the participating business would continue to be governed by that determined under Section 49 of the Insurance Act, with shareholder participation capped at 10 per cent. 

 

Accounting profit recognised under Ind AS 117 will not automatically translate into distributable surplus. Insurers will be required to provide reconciliations between actuarial surplus and Ind AS profit.