Roadmap of Ind AS for the insurance sector in India

The Insurance Regulatory and Development Authority of India (IRDAI) had recently issued a Consultation Paper and an Exposure Draft proposing amendments to the IRDAI (Actuarial, Finance and Investment Functions of Insurer) Regulations, 2026 (hereinafter, referred to as ‘the Regulation’) to require adoption of Indian Accounting Standards (Ind AS) across the insurance sector. In a landmark move, the Roadmap has been approved by the IRDAI in its meeting held on 30th March 2026. In accordance with the Roadmap, All Indian insurers viz. Life, General, Health and Reinsurers, will transition to Ind AS with effect from 1 April 2026. This transition aims to significantly enhance transparency, comparability, and investor confidence by aligning India’s reporting framework with globally accepted IFRS accounting practices. Further to provide operational clarity, IRDAI has issued a circular dated 1 April 2026 titled “Clarifications on implementation of Indian Accounting Standards (Ind AS)” (hereinafter, referred as “the Circular”). Please note, this publication covers the circulars and press releases by IRDAI till 1 April 2026.

To facilitate smooth transition, for insurers facing challenges in immediately shifting to Ind AS, a provision has been made to grant forbearance for one-year. However, it should be noted that during this period, such insurers will continue to submit Financial Information i.e., Ind AS Proforma Financials to the IRDAI as per Schedule IIA of Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers), (Amendment) Regulations, 2026 on a quarterly basis.

The transition to Ind AS represents one of the most transformative accounting change for insurers, fundamentally reshaping how insurers measure liabilities, recognise profit, model cash flows, manage data and communicate financial performance. Moving from a rule based Indian GAAP framework to a market consistent, principles based Ind AS regime aligned with IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments introduces concepts such as fulfilment cash flows, contractual service margin (CSM), risk adjustment, discounting, expected credit loss (ECL) models and extensive disclosures. These changes will redefine profit computation, provide a more realistic view of insurance obligations and strengthen the basis for comparing Indian insurers with global peers.

At the same time, it should be noted that transition to Ind AS is highly complex and resource intensive exercise, requiring insurers to update systems, actuarial engines, data architecture, finance actuarial integration, internal controls and governance frameworks. The industry has made progress through gap assessments, proforma Ind AS submissions, and capacity building efforts, although varying degrees of gaps in systems, data granularity, and availability of skilled resources remain across some insurers.

Steps taken till date

Since 2022, the IRDAI has taken a structured and collaborative approach to support as well as prepare insurers for Ind AS adoption. The IRDAI had established a dedicated Mission Mode Team for Ind AS implementation to engage continuously with insurers and other stakeholders, study implementation practices across various jurisdictions and guide the industry toward a smooth adoption of Ind AS. In parallel, most insurers have created their own Ind AS Steering Committee to oversee preparation toward the effective implementation of Ind AS.

The implementation roadmap for insurers began with a gap assessment exercise. The IRDAI released a gap assessment template which has been completed by all the insurers. Insurers have initiated structured transformation programmes to address these gaps and have made progress toward implementation readiness through investments in technology, process redesign and capacity building.

As the next milestone, the IRDAI mandated insurers to submit Ind AS Proforma Financial Statements in a phased manner, depending on size of the insurer. The proforma financial statements for FY 2023–24 have been submitted by most insurers under Phase 1, Phase 2 and Phase 3 (with a few exceptions under Phase 3). Further, most insurers under Phase 1 and some insurers under Phase 2 have also submitted their Ind AS proforma financial statements for FY 2024–25.

The IRDAI has constituted a Joint Expert Group to examine and address issues arising during the implementation of Ind AS by insurers. The Group is chaired by the Whole Time Member (Finance & Investment), IRDAI, and include representatives from Institute of Chartered Accountants of India (ICAI), Institute of Actuaries of India (IAI), Securities and Exchange Board of India (SEBI) and National Financial Reporting Authority (NFRA), with the Head of Department (Finance & Investment), IRDAI acting as Member‑Convener. Its functioning will be guided by IRDAI, and the Group will operate for two years or such extended period as specified.

Key takeaways and perspectives on the Roadmap

Discounting

Under Ind AS 117, measurement of insurance contract liabilities requires discounting future cash flows using an appropriate discount rate to reflect time value of money. The IRDAI has clarified in the Circular that discounting of insurance contract liabilities shall be carried out in accordance with the provisions of Ind AS 117 and illiquidity premium and the top-down approach shall be applicable. The risk-free rate for the purpose of such discounting shall be derived from the term structure of interest rates based on Government of India securities, using the zero-coupon yield curve published by the Clearing Corporation of India Limited (CCIL), or any other source as may be specified from time to time.

Solvency calculations

The IRDAI has clarified that existing solvency requirements will remain unchanged and will continue to be based on the existing framework. Further it is expected that implementation of Ind AS will provide a sound foundation for implementation of RBC (Risk Based Capital) Framework, on a go forward basis.

Policyholder and shareholder fund segregation

The Insurance Act mandates separate reporting of policyholder and shareholder funds in the financial statements while IFRS requires financial statements to be presented at the entity level. The IRDAI has prescribed an approach where compliance with IFRS and Insurance Act both can be done. To ensure alignment with global practices, insurers will prepare Balance Sheet, Statement of Profit and Loss, Statement of Changes in Equity and Statement of Cash Flows at the entity level. To ensure compliance with the Insurance Act, 1938, Insurers will prepare a separate Revenue Account representing the policyholder fund and shall include the same in Financial Statements.

However, preparation of the policyholder’s revenue account in the given format may give rise to practical challenges, including bifurcation of non-attributable expenses between the Segments and the apportionment of taxes between shareholder and policyholder funds. In view of these complexities, insurers would benefit from additional guidance from IRDAI on the presentation of Financial Statements. The IRDAI has acknowledged these concerns in its “General statement of response to the public comments on Exposure draft“ and indicated that further clarifications will be issued.

Annual cohort requirements

Ind AS 117 requires grouping of insurance contracts into portfolios and further into groups based on profitability and year of issuance, thereby mandating annual cohorting. Insurers have highlighted that applying annual cohorting to participating insurance business poses significant operational and system challenges and had requested exemption from annual cohort requirement from Participating business.

The exemption has not been provided and insurers to comply with annual cohorting requirements for participating insurance contracts post transition, in accordance with Ind AS 117. Transition relief, where applicable, shall be applied in accordance with Ind AS 117 provisions.

Distribution of surplus in participating insurance business

The IRDAI has proposed that actuarial surplus determined based on actuarial valuation of the participating fund in accordance with Insurance Act will continue to be the basis for distribution of surplus to participating policyholders and shareholders. Statutory limit of ten per cent of actuarial surplus for shareholder distribution will remain. Reconciliation between actuarial surplus and Ind AS 117 profit and other relevant disclosure will form part of notes to accounts. These details relating to Distribution of Surplus has been incorporated in the Regulation by the IRDAI. A separate line item for non-distributable retained earnings has been incorporated in the Statement of Changes in Equity. Further clarifications, if any, for determining actuarial surplus will be specified separately

Parallel reporting

The regulation requires parallel reporting for a period of two years, where insurers will be required to submit Ind AS financial statements along with existing IGAAP based financial information. The new Ind AS framework will be considered as Statutory Financial Reporting and the existing IGAAP framework will be considered as Special-purpose regulatory submission.

Reporting Requirements

Financial Statements and Financial Information shall be prepared and submitted on a quarterly basis in the formats as specified under Schedule – II and Schedule – IIA as applicable. As part of Financial Statements, Insurers shall provide appropriate reconciliation between Financial Statements and the Financial Information as per Ind AS 101.

For the financial year 2026–27, the Financial Statements and Financial Information for the first three quarters shall be submitted within a period of three months from the end of the respective quarter. However, for listed insurers, timelines for disclosures of Financial Statements will continue as per SEBI norms.

Audit Requirements

The Circular clarifies the audit requirements for insurers during the Ind AS transition. Financial Statements for the first three quarters shall be subject to limited review in accordance with the applicable Standards. Annual Financial Statements shall be subject to Audit as per provisions of Insurance Act, 1938 and Companies Act, 2013. Financial Information for all four quarters shall be subject to limited review in accordance with the applicable Standards

In addition to the regular statutory audit, insurers must obtain an independent validation of their Ind AS financial statements from an auditor selected from the IRDAI empanelled list of auditors, specifically during the first year of implementation or for any additional period specified by the Authority. The scope and manner of such validation to be provided by the IRDAI in consultation with Joint Expert Group.

Under the current Indian GAAP framework, statutory auditors rely on the work of the Company’s Appointed Actuary (AA) for actuarial liabilities and explicitly state this reliance in the audit reports. However, with Ind AS 117 coming into effect, more actuarial professional involvement is important and hence the auditor’s role will consequently expand. Similar to global practice under IFRS 17, auditors may be required to directly involve actuarial specialists to independently review and audit key Ind AS 117 requirements. The IRDAI may also consider clarifying this requirement in future communications.

Expense of Management (EoM)

EoM refers to the regulatory limits on the expenses an insurance company is allowed to incur. The Circular clarifies that Expenses of Management, shall continue to be governed by the provisions of Schedule – II (IGAAP) of the Regulations.

Taxation

The IRDAI in its “General statement of response to the public comments on Exposure draft” has clarified that for tax purpose, applicable tax laws shall continue to apply. However, certain clarifications will be required. Such as, transition to Ind AS is expected to result in a one‑time adjustment to net worth. However, tax treatment of this transition impact is unclear. Clear guidelines are required to ensure insurers understand how these adjustments will be taxed and timing of taxation, preventing uncertainty.

Also, under Ind AS, ongoing financial statements may include unrealised gains within reported profits. For general insurers, where ‘profit before tax’ forms basis for computing taxable income, tax treatment of unrealised gains remains uncertain. Clear guidance is needed to ensure consistent and appropriate taxation of these items in subsequent periods and to prevent unintended tax consequences for insurers.

Overview of Ind AS requirements

Ind AS 117 introduces a comprehensive and modern framework for accounting of insurance contracts in India, aligning closely with global principles under IFRS 17. It establishes robust measurement models such as the Building Block Model (General Measurement Model), the Premium Allocation Approach for short duration contracts and the Variable Fee Approach for participating contracts. Central to the standard is the concept of fulfilment cash flows – probability weighted estimates of future inflows and outflows, discounted for the time value of money and adjusted for nonfinancial risk. These fulfilment cash flows form the basis of liability measurement across all models.

The standard also introduces the Contractual Service Margin (CSM), representing unearned profit that is systematically recognised as insurance services are provided, ensuring transparency in performance reporting.

A key change under Ind AS 117 is the clear distinction between insurance service results and insurance finance results in profit or loss. This separation helps users distinguish underwriting performance from the effects of discount rate movements and financial assumptions.

The standard also requires insurers to separately recognise and present insurance contracts issued and reinsurance contracts held, without offsetting, thereby enhancing clarity around gross exposure and the effect of risk mitigation.

Ind AS vs. Indian GAAP: Other key differences

Concluding remarks

During the gap-assessment phase, the industry identified gaps across data, systems and resourcing. Since then, there has been meaningful progress through policy deliberations, system reviews, vendor selection, and initial implementation activities. However, for many insurers, these areas continue to evolve.

Beyond subledger deployment, insurers are required to upgrade actuarial systems, redesign their general ledger, chart of accounts, and integrate various systems. Where such integrations are still progressing, insurers may continue to rely on manual adjustments outside the core systems for Financial Reporting under Ind AS in the initial years.

In summary, while the industry has produced Ind AS proforma financial statements, full implementation readiness is still evolving for several insurers.

Recognising this varied state of preparedness across the Industry, IRDAI has adopted a pragmatic pathway. Insurers that are ready will implement Ind AS from 1st April 2026 while insurers that are facing some challenges may avail a one-year forbearance. Importantly, Insurers opting for forbearance will continue to submit Ind AS based financial information to the IRDAI on a quarterly basis, ensuring sustained momentum toward adoption.

This approach reflects IRDAI’s strong commitment to Ind AS implementation, firmly setting a definitive transition date while simultaneously providing operational flexibility to help insurers manage complexity without diluting the objective. It demonstrates the regulator’s intent to support insurers through the transition, while maintaining regulatory discipline and forward progress.

It remains to be seen how many insurers will adopt Ind AS from 1 April 2026 and how many will opt for the forbearance period. However, one conclusion is unequivocal: whether in 2026 or 2027, the Indian insurance industry is moving towards Ind AS, marking a significant step toward global alignment, enhanced transparency, and more robust financial reporting.