Ind AS 117 and IFRS 17

What is Ind AS 117?

Ind AS 117 (Insurance Contracts) is the Indian Accounting Standard that sets how insurers recognise, measure and present insurance contracts in their financial statements. It is substantially converged with IFRS 17, issued by the International Accounting Standards Board in 2017 and effective internationally from 1 January 2023, which replaced the interim standard IFRS 4. The Ministry of Corporate Affairs notified Ind AS 117 on 12 August 2024.

Indian insurers have historically prepared accounts under Indian GAAP in formats prescribed by IRDAI, rather than under Ind AS. Ind AS 117 (with Ind AS 109 for financial instruments) changes that.

How Ind AS 117 measures insurance contracts

Ind AS 117 measures groups of insurance contracts on current, explicit estimates:

• Fulfilment cash flows: the present value of expected future premiums, claims, benefits and expenses, discounted at current rates.
• Risk adjustment: an amount for the uncertainty in non-financial risks such as mortality or claims.
• Contractual service margin (CSM): the unearned profit the insurer expects to make on the group. CSM is not taken to profit on day one; it is released as insurance service is provided over the life of the contracts. If a group is expected to be loss-making, the loss is recognised immediately.

For short-duration business, such as most general insurance, a simplified premium allocation approach is allowed. Contracts are grouped by portfolio, by profitability and by annual cohort. IRDAI proposed that Indian insurers apply the annual cohort requirement to participating contracts as well.

Revenue also changes. Under Ind AS 117, insurers report "insurance revenue" reflecting the service provided in the period, not premium written. Investment components (amounts returned to the policyholder in all circumstances, such as part of a savings plan's maturity value) are excluded from revenue.

Illustration (illustrative numbers)

A group of savings policies is expected to produce ₹100 crore of profit over ten years. Under Indian GAAP, the insurer may show a loss in year one because commission and setup costs are expensed upfront. Under Ind AS 117, the ₹100 crore sits in the CSM and is released roughly in line with service, around ₹10 crore a year, with acquisition costs spread across the same period.

Status in India (as of October 2026)

The insurers adopting from 2026-27 include Tata AIA Life, Acko Life, SBI General, Star Health, Niva Bupa and others. Those given forbearance are being monitored against board-approved monthly milestones. In the first year, insurers must obtain independent validation of their Ind AS statements, and the transitional arrangements include parallel IGAAP reporting for two years or such period as the Authority specifies. Solvency continues to be calculated under IRDAI's own framework, not Ind AS.

What Ind AS 117 means for distribution

• Profit emerges differently. Strong new business no longer depresses first-year accounting profit the way it does under Indian GAAP. Profit will track the CSM release, which makes reported earnings closer to the economics that VNB already shows.
• Onerous contracts show up at once. Products or channels whose business is expected to be loss-making must be recognised as losses immediately. Poorly priced group health or credit life portfolios, or partners with very high acquisition costs, become visible faster.
• Persistency changes hit the CSM. If lapses run above assumption, future profit in the CSM falls. The link between distribution quality and reported results becomes more direct.
• Acquisition cost allocation matters. Commission and other acquisition cash flows are allocated to contract groups, so how insurers record and attribute channel costs will receive more scrutiny.
• Comparisons will be messy for a while. With some insurers on Ind AS from 2026-27 and others from 2027-28, peer comparisons of premium, revenue and profit need care.