Insurance Regulatory and Development Authority of India clears risk-linked capital, new accounting norms for insurers

Mumbai: Indian insurance companies are preparing to move away from uniform solvency and accounting frameworks as the Insurance Regulatory and Development Authority of India (IRDAI) advances the implementation of risk-based capital norms and a new accounting standard aligned with global practices, according to a Times of India report.

The Irdai board has approved the introduction of a risk-based capital (RBC) framework along with the adoption of Ind AS 117, India’s version of IFRS 17, with both reforms scheduled to come into force from April 2026, TOI reported. The changes will replace the existing one-size-fits-all solvency approach with capital requirements that vary based on the specific risk profile of each insurer.

Under the proposed RBC regime, insurers will be required to hold capital in proportion to risks arising from underwriting, investments, credit exposure and operational factors, the report said. Insurers with higher exposure to long-term guarantees, volatile claim patterns or catastrophe-linked business will need to maintain higher capital buffers, while those with relatively stable and well-reinsured portfolios may face lower capital requirements.


The shift is also expected to influence product design and pricing across the life, general and health insurance segments. According to the report, life insurers may reassess long-duration products with guaranteed returns, while general insurers with significant exposure to segments such as motor third-party insurance, crop insurance and catastrophe-prone property covers could see a higher capital impact under the new norms.

Alongside capital reforms, the adoption of Ind AS 117 will change how insurers recognise revenue and profits. Instead of booking the full premium at the time of policy issuance, insurers will recognise income over the period during which insurance services are provided. The accounting standard will also require insurers to separately disclose expected claims, risk adjustments and future profit margins, the report said.

The new reporting framework is expected to make loss-making products and pricing mismatches more visible in financial statements, prompting insurers to tighten underwriting and pricing discipline. Health insurers, particularly those with large group and corporate portfolios, may need to revisit pricing structures as thinner margins become more apparent under the new accounting norms, according to the report.

The regulator has provided a transition window to allow insurers to upgrade systems, actuarial models and reporting processes ahead of the April 2026 deadline. Insurers have already begun internal impact assessments and parallel reporting exercises to prepare for the shift, the report added.

The regulatory changes come amid broader reforms in the insurance sector, including recent legislative approval to raise foreign direct investment in insurance to 100%, aimed at strengthening capital availability and aligning India’s insurance market with international standards.

With inputs from TOI