New Accounting Standards for Insurance Sector Soon
The government will shortly announce the new accounting standards for insurance contracts that will harmonise Indian standards with international standards and enable foreign investors to more accurately assess the risk exposure of local insurers.
A report in The Economic Times quoted a senior official saying that the National Financial Reporting Authority (NFRA) had submitted suggestions to the Ministry Of Corporate Affairs (MCA) about the Indian Accounting Standard (Ind AS) 117 for insurance contracts.
“The NFRA’s suggestions are being evaluated. The standards will soon be notified under the Companies (Indian Accounting Standards) Rules 2015,” He further stated that the insurance regulator might later announce the adoption date for the new standards by the relevant entities. He also mentioned that the current Ind AS 104, Insurance Contracts, would be replaced by the new standards.
The new regulations, which are based on IFRS 17 published by the International Accounting Standard Board, would aid in attracting Foreign Direct Investment (FDI) and deepening insurance penetration in India. This is because, according to him, international investors would be better able to contrast the financial results of domestic insurers with those of their international competitors. The new approach would force domestic insurers to strengthen their disclosure requirements, resulting in more transparency and well-informed choices.
The government approved foreign ownership and control of these companies with specific protections in 2021 and increased the FDI cap in the insurance sector from 49% to 74%. The international standards, IFRS 17, were created with the express purpose of capturing the special characteristics of the insurance and investment contracts of diverse insurance firms. Before finalising the suggestions, the NFRA had extensive talks with the Insurance Regulatory Development Authority of India and other stakeholders, including businesses and the Institute of Chartered Accountants of India. Ind AS 117 would considerably converge with the IFRS Standard, which has been accepted in more than 140 countries, according to NFRA Chairman Ajay Bhushan Pandey’s April statement.
