Clarifications on Implementation of Indian Accounting Standards

Ref: IRDAI/IFRS/CIR/MISC/94/7/2026 14thJuly, 2026

CIRCULAR

To, All Insurers

Subject: Clarifications on implementation of Indian Accounting Standards

1. Background

1.1 Reference is invited to Circular No. IRDAI/F&I/CIR/MISC/45/4/2026 dated 1 April 2026 on "Clarifications on implementation of Indian Accounting Standards (Ind AS)". Based on representations received from insurers and to ensure consistent implementation of the regulatory framework, the Authority hereby issues the following additional clarifications on role of the Appointed Actuary, Independent Validation and Ind AS-compliant Financial Statements for consolidation purposes.

2. Role of the Appointed Actuary in Preparation of Financial Statements under Ind AS

2.1 As per provisions of Clause 6 and 7 of Part II of Schedule I of the Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, the Appointed Actuary shall, for the purpose of preparing Financial Statements in accordance with the applicable Ind AS, provide actuarial expertise, advice and other actuarial inputs relevant to the preparation of the Financial Statements.

2.2 The responsibilities of the Appointed Actuary shall include:

a. actuarial valuation and measurement of policy liabilities in accordance with the applicable Ind AS, where policy liabilities include insurance contract liabilities under Ind AS 117, liabilities arising from investment contracts under Ind AS 109 and service contracts under Ind AS 115;

b. determination and review of the actuarial methodologies and assumptions used in the measurement of policy liabilities;

c. actuarial inputs in connection with the Financial Statements disclosures relating to insurance contracts and reinsurance contracts held; and

d. such other actuarial matters as may be necessary for compliance with the applicable Ind AS, the regulations, circulars and directions issued by the Authority and the applicable professional standards/ guidance notes issued by the Institute of Actuaries of India (IAI).

2.3 Submission of Technical Report on Ind AS Financial Statements by the Appointed Actuary to the Board of Directors of Insurer (Board):

a. The Appointed Actuary shall submit a technical report to the Board in respect of the actuarial valuation of policy liabilities for the preparation of Financial Statements prepared in accordance with the applicable Ind AS.

b. The technical report shall cover the material actuarial methodologies, assumptions, judgements, reliance placed on information provided by the management or other functions of the insurer, compliance with the applicable professional standards/ guidance notes issued by the Institute of Actuaries of India and such other matters considered material by the Appointed Actuary in preparation of Ind AS Financial Statements.

c. On first-time adoption of Ind AS, the technical report shall additionally include reconciliation of policy liabilities determined under the previous accounting framework as per Schedule II of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 and the policy liabilities under Ind AS Financial Statements together with an explanation of the material differences.

d. The technical report shall be placed before the Board for its consideration. A copy of the report, as approved by the Board, shall be submitted to the Authority along with the annual Financial Statements.

3. Independent Validation

3.1 In pursuance of Clause 7 of Schedule IIA of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, every insurer shall obtain an Independent Validation of the process adopted for implementation of the applicable Ind AS during the first year of implementation of the Ind AS. Accordingly, the requirement shall apply in FY 2026–27 for insurers implementing Ind AS from FY 2026–27 and in FY 2027–28 for insurers who have been granted forbearance.

3.2 Paragraph 8 of the Circular on "Clarifications on implementation of Indian Accounting Standards (Ind AS)" dated 1st April 2026 provides that the scope and manner of Independent Validation of the processes adopted for implementation of Ind AS shall be specified by the Competent Authority in consultation with the Joint Expert Group constituted under the Regulations. Accordingly, the scope, manner, responsibilities and reporting requirements for the Independent Validation of the process adopted by insurers for implementation of Ind AS is specified below.

3.3 Objective of Independent Validation: The objective of the Independent Validation is to assess whether the systems, governance framework, processes and controls established by the insurer for implementation of Ind AS are adequate, appropriate and operating effectively, including the following:

a. an appropriate implementation strategy, governance structure and oversight mechanism have been established by the Board and the Management of the Insurer;

b. governance arrangements, internal controls and implementation processes are commensurate with the nature, scale and complexity of the insurer's operations;

c. accounting policies, methodologies and implementation approaches adopted are consistent with the applicable requirements of Ind AS, including Ind AS 117, Ind AS 109 and other applicable standards;

d. significant assumptions, judgements, methodologies and decisions relating to recognition, measurement, presentation and disclosure have been appropriately documented and retained; and

e. calculations, actuarial and financial models, data inputs and governance processes have been consistently designed and applied.

3.4 The Independent Validation is limited to an assessment of the processes adopted by the insurer for implementation of Ind AS and does not constitute an audit of the Financial Statements or an actuarial opinion on policy liabilities or an assurance on the accuracy of the Financial Statements.

3.5 Independent Validator: Every insurer shall appoint an Independent Validator for carrying out the Independent Validation. The Independent Validator shall:

a. be a professional Chartered Accountancy firm that is neither appointed as the Statutory Auditor of the insurer nor is Ind AS implementation service provider/knowledge partner engaged by the insurer, if any, and satisfies the applicable independence requirements under the relevant laws, regulations and professional standards;

b. evaluate the adequacy and effectiveness of the processes, governance, controls and documentation established by the insurer for implementation of the applicable Ind AS;

c. be guided by the principles contained in applicable Standards on Auditing issued by the Institute of Chartered Accountants of India, including SA 620, “Using the Work of an Auditor's Expert”. The Independent Validator shall utilise actuarial expertise, advice and other actuarial inputs from an actuary independent of the insurer in respect of actuarial matters relevant to the Independent Validation;

d. consider the materiality of the matters under review, including any alternate processes, controls or governance mechanisms adopted by the insurer in meeting the requirements relating to implementation of the applicable Ind AS;

e. provide an Independent Validation opinion, supported by appropriate observations, on the adequacy and effectiveness of the insurer's implementation process; and

f. establish an appropriate process for communicating significant observations during the one-year period, obtaining management comments on the observations and considering such comments before issuance of the final Independent Validation Report.

3.6 Scope of Independent Validation: The Independent Validation shall include, at a minimum, assessment of the following areas.

a. Strategy: The Independent Validator shall assess whether the insurer has established an appropriate strategy for implementation of Ind AS, including:

i. Board-approved implementation strategy and roadmap, including timelines and milestones;

ii. governance structure and accountability;

iii. adequacy of implementation resources, including actuarial, finance, risk and information technology functions;

iv. data management and implementation strategy;

v. transition approach adopted under the applicable provisions of Ind AS 101 and Ind AS 117;

vi. information technology and systems readiness for implementation of Ind AS; and