Insurance regulator sets IndAS as foundation for new capital framework

UPDATE - follow-up to IRDAI forms working groups on risk-based capital framework convergence with IndAS: Financial statements prepared under Indian Accounting Standards will serve as the starting point for the upcoming Risk-Based Capital framework for Indian insurers.

Working Groups

The Insurance Regulatory and Development Authority of India has formed separate working groups for life and non-life insurers to handle this transition. Their main goal is to align the Risk-Based Capital system with Indian Accounting Standards so that a single set of data, models, and assumptions supports the valuation process. IRDAI Chief General Manager of Actuarial and Risk-Based Capital C. Srinivasa Kumar stated that the groups must prepare an exposure draft of the regulations and an approach paper within one month.

Framework Goals

The new Risk-Based Capital framework aims to make capital requirements match the actual risks an insurer carries, shifting away from the older factor-based solvency system. IRDAI noted that using separate, unconnected bases would create extra costs, reconciliation challenges, and regulatory arbitrage. The converged system is designed to be transparent, easy to compare across companies, and practical to implement over a realistic timeline, while maintaining policyholder protection and faithful financial reporting.

Context

This update builds on the regulator's earlier directive advising insurers to prepare financial statements using Indian Accounting Standards starting from April 1, 2026. Regulatory bodies regularly update accounting and solvency rules to match modern financial practices and strengthen oversight across the sector.