New accounting standards for insurance notified, raise investment chances, ET LegalWorld
The Ministry of Corporate Affairs (MCA) on Wednesday notified new accounting norms for “insurance contracts”, aligning the Indian standards with the global ones and paving the way for a major revamp in the country’s accounting practices adopted in the insurance industry.
The new standards would help global investors better gauge the risk exposure of domestic insurers, a senior official said.
The Accounting Standard (Ind AS 117) would be applicable from April 1, 2024, the ministry said in a notification.
The new framework would require domestic insurers to further bolster their disclosure needs, leading to greater transparency and informed decision-making.
These standards, modelled on the IFRS 17 issued by the International Accounting Standard Board (IASB) that is adopted in about 140 countries, will help draw foreign direct investment (FDI) into the insurance sector and also deepen insurance penetration in the country. This is because international investors would be able to better compare the financials of domestic insurers with those of their global peers, officials had told ET earlier.
The latest notification follows the recommendations of the National Financial Reporting Authority (NFRA), which had held extensive deliberations with the Institute of Chartered Accountants of India and others.
The insurance regulator could now announce the date of adoption of the new standards by relevant entities, said the official.
The government had in 2021 raised the FDI limit in insurance to 74% from 49% and allowed foreign ownership and control of these firms with certain safeguards.
IFRS 17, the global standards, are specifically designed to capture the unique features of the insurance and investment contracts of various insurance entities.
IASB’s fact sheet of 2017 says, with $13 trillion in assets, insurers account for 12% of the total assets of listed companies that use IFRS Standards.
Appointments to IEPFA
Through a separate notification, the government has appointed MCA secretary Manoj Govil the chairman of the Investor Education and Protection Fund Authority (IEPFA). He will assume this role in addition to his current position. RBI executive director Neeraj Nigam has been appointed an ex-officio member of the IEPFA.
The notification also announces the appointment of four others–Praveen Garg, Meenakshi Sharma, Dhirendra Kumar and Veni Thapar–as members.
