Insurance will soon have a new accounting standard.
Synopsis
The National Financial Reporting Authority (NFRA) has made recommendations to the Ministry of Corporate Affairs (MCA) on the Indian Accounting Standard (Ind AS) 117 for insurance contracts, he told ET.”The NFRA’s recommendations are being considered.” “The standards will be published soon under the Companies (Indian Accounting Standards) Rules 2015,” he noted.
According to a senior government source, the government will shortly declare a new accounting standard for insurance contracts that would match Indian standards with foreign practises and assist global investors better measure the risk exposure of domestic insurers.
The National Financial Reporting Authority (NFRA) has made recommendations to the Ministry of Corporate Affairs (MCA) on the Indian Accounting Standard (Ind AS) 117 for insurance contracts, he told ET.
“The NFRA’s recommendations are being considered.” “The standards will be published soon under the Companies (Indian Accounting Standards) Rules 2015,” he noted.
Following that, the insurance regulator might declare the date on which relevant firms would implement the new criteria, he added. The new standards will supersede the existing Insurance Contracts Ind AS 104.
The new regulations, built after the International Accounting Standard Board’s IFRS 17, will assist attract foreign direct investment (FDI) into the insurance industry while also increasing insurance coverage in the country. This is because foreign investors will be able to better compare local insurers’ financials to those of their global rivals, he claims.
Domestic insurers would be required to strengthen their disclosure requirements under the new framework, resulting in improved openness and informed decision-making.
The government increased the FDI ceiling in insurance from 49% to 74% in 2021, allowing foreign ownership and control of these enterprises with certain protections.
The worldwide standards, IFRS 17, are especially intended to capture the distinctive aspects of diverse insurance firms’ insurance and investment contracts.
Before finalising the suggestions, the NFRA had extensive talks with the Insurance Regulatory Development Authority of India and other stakeholders, including corporations and the Institute of Chartered Accountants of India.
In April, NFRA chairman Ajay Bhushan Pandey said that Ind AS 117 will be largely convergent with the IFRS Standard, which is used in over 140 countries.
In India, insurance penetration was 4.2% in FY22, whereas the worldwide average was 7% in 2021. The domestic market, on the other hand, is expanding at a higher rate. In 2021, India’s real premium will have increased by 7.8%, more than double the world average of 3.4%.
According to the IASB’s 2017 fact sheet, insurers account for 12% of the total assets of listed firms that use IFRS Standards, with $13 trillion in assets.
