The insurers, represnted by the General Insurance Council, have approached the tax authorities for the necessary approval and have already presented their case before the Arvind Shrivastava, Revenue Secretary, Ministry of Finance.
New Delhi: Indian general insurance companies are seeking permission to amortise losses arising from the transition to the new Indian Accounting Standards (Ind AS) over the next five years, in a move aimed at cushioning the financial impact of the new accounting regime.
The insurers, represnted by the General Insurance Council, have approached the tax authorities for the necessary approval and have already presented their case before the Arvind Shrivastava, Revenue Secretary, Ministry of Finance,who is supportive of the move, said industry sources.
However, the proposal will also require regulatory clearance from the Insurance Regulatory and Development Authority of India (IRDAI), which is yet to take a decision on the matter.
The regulator’s decision will be crucial in determining whether insurers can spread the transition-related losses over the proposed five-year period.
The proposed amortisation would allow insurers to spread the transition-related losses over five years instead of recognising the entire impact in a single accounting period. This would help them manage the initial financial strain, maintain greater stability in their reported financial performance and adapt more smoothly to the new accounting framework.
The transition to Ind AS 117, the insurance contracts accounting standard, represents a significant change in the way insurance companies recognise profits, measure insurance liabilities and report their financial performance. The new framework is intended to bring greater transparency, consistency and comparability to insurance sector financial reporting.
IRDAI has made the new accounting framework applicable to the Indian insurance industry from April 1, 2026. However, implementation has not been uniform across the sector. Only four general insurers have moved to the new accounting regime from the beginning of the current financial year, while the remaining insurers have deferred implementation by one year after obtaining regulatory permission.
The staggered adoption reflects the operational and financial challenges involved in shifting to the new reporting framework. Insurers have had to undertake extensive changes to their accounting systems, actuarial models, data infrastructure and financial reporting processes.
For general insurers, the transition is particularly significant because of the nature of their business, which involves short-duration policies, fluctuating claims experience and considerable underwriting volatility. The new accounting requirements could also affect the timing and pattern of profit recognition, making the initial transition financially challenging.
The industry’s demand for a five-year amortisation window is therefore aimed at avoiding a sudden impact on balance sheets and reported earnings. Insurers believe that a phased recognition of transition losses would give them greater flexibility to absorb the financial consequences while adjusting their operations to the new regime.