IRDAI had indicated Ind AS implementation for insurance companies in a phased manner between FY2026 to FY2028.  Key challenges for companies requiring implementation related to changes in actuarial and risk models, deferment of acquisition costs, deferment of reinsurance commissions, etc. This also required Change in budgeting system to align business planning and forecasting models with new external reporting basis and enhance models for detailed risk and sensitivity analysis as desired by Ind AS 117

Applicability of Ind AS 117 Insurance contracts had been notified by MCA during mid August. This requires redefining recognition, measurement and reporting of financial statements by insurance companies in line with new standard. First-time reporting under Ind AS 117 was to start as early as quarter ended 30 September 2024 (with retrospective effect from 1 April 2024).

IND AS 117 have significant impact on business operations as Revenue recognised under long-term contracts especially by life insurers may undergo significant reduction. This may affect consolidated revenue of listed holding companies. Presently various disclosures under SEBI LODR such as threshold limits for related party transactions, materiality for disclosure to stock exchanges are based on consolidated turnover. Lowering of thresholds may cause significant difficulties in doing business unless exemptions are provided. Further Ind AS 117 significantly changes the format of Statement of Profit and Loss with presentation of additional line items such as Insurance Service Revenue, Insurance Service Expense and Insurance Finance Results etc.

IRDAI had indicated Ind AS implementation for insurance companies in a phased manner between FY2026 to FY2028.  Key challenges for companies requiring implementation related to changes in actuarial and risk models, deferment of acquisition costs, deferment of reinsurance commissions, etc. This also required Change in budgeting system to align business planning and forecasting models with new external reporting basis and enhance models for detailed risk and sensitivity analysis as desired by Ind AS 117.

Insurance companies having listed holding company with Ind AS financial reporting will have to transition from Ind AS 104 to Ind AS 117 for group reporting from as early as 30 September 2024 with retrospective impact from 1 April 2024 and with comparative results from 1 April 2023 and thereafter.  IRDAI had indicated Ind AS implementation for insurance companies in a phased manner between FY2026 to FY2028 and hence insurers have accordingly been working on a transition plan which cannot be fastened in such a short span of time.  

Where the listed holding company is not covered by Ind AS (such as banks), the consolidated results may not be under Ind-AS. Investors may find it confusing to compare results across insurance companies.           Standalone accounts being under one set of standards while consolidation adopts second set of standards. This may result in confusion in the minds of investors and other stakeholders. Comparison of results over time may be vitiated.

In the current regime, auditors are not required to audit actuarial reserves, however under Ind AS117 the auditors will be required to audit the actuarial reserves which may require auditors to build actuarial capabilities. There is a lack of clarity between auditors’ scope and appointed actuary’s responsibility.

Ministry of Corporate Affairs have notified Ind AS 117 Insurance contracts with effect from on or after 1 April 2024. With this amendment, Ind AS 117 superseded Ind AS 104 Insurance Contracts.

Insurance companies having listed holding company with Ind AS financial reporting will have to transition from Ind AS 104 to Ind AS 117 for group reporting from as early as 30 September 2024 with retrospective impact from 1 April 2024 and with comparative results from 1 April 2023 and thereafter.

However on 30th September, Government issued notification for relaxation to for applicability to Insurance Companies. Insurance as a Sector has a huge potential for attracting Foreign Investment and providing jobs. Both the MCA and Sectoral Regulator may work in tandem and in a way that is best for the Insurance Industry.

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