Ind AS for Insurance

The Indian insurance industry has gone through plenty of changes in recent years. One of the major changes in this industry is the adaptation of Indian Accounting Standards (Ind AS). Indian Accounting Standards (Ind AS) align with the International Financial Reporting Standard (IFRS). This change results in more transparency, comparability, and consistency in financial reporting for companies.

What is Ind AS?

The Ministry of Corporate Affairs (MCA) advised a set of accounting standards that are aligned with the International Financial Reporting Standards (IFRS). These accounting standards are considered Indian Accounting Standards (Ind AS). These standards provide reliability and comparability for financial statements so that investors can rely on them without hesitation.

Need of Ind AS for Insurance Industry

Insurance Industry used to deal with long term contracts and complicated financial instruments. Traditional accounting standards are not able to cope up with these complex problems results in that it becomes difficult to find the real financial position. Thus, Ind AS provides a more accurate process that provides the true financial position for the company.

Key Ind AS Standards Applicable to Insurance

Some of the Ind AS are related to Insurance Industries: –

Ind AS 104 for Insurance contracts

Ind AS 104 is used to provide instructions for the recognition, calculations, and reporting of insurance contracts. It allows insurers to go on with the existing policies regarding insurance contracts, with some changes according to Ind AS 104 to ensure consistency.

 Ind AS 109 for Financial Instruments

For the categorization, measurements, and impairment of financial instruments, Ind AS 109 comes into play. This standard holds special importance as it impacts investments, policyholder loans, and financial assets.

Ind AS 32 and Ind AS 107 for Presentation of Financial Instruments and Disclosures

These standards are used to present financial instruments and important disclosures. This will help the users interpret the insurance company’s performance, financial health, and weaknesses.

Challenges for the Implementation of Ind AS for Insurance Companies

The shift to Ind AS for insurance companies faces some challenges that are given below:

1. For insurance liabilities, Ind AS introduced some estimation techniques, such as the fulfillment cash flow approach. This leads to a requirement for the insurers to comprehend the sophisticated actuarial models as well as assumptions, which can be complex for the insurers.
2. Ind AS introduced new IT features for the processes regarding financial reporting and internal controls. Insurance companies have the burden of investing more in technology fields as well as training their employees.

3.Ind AS makes broad disclosures mandatory that are cumbersome for most of the insurers.

Opportunities for Insurance Industry

Instead of challenges, there are plenty of opportunities, which are given below:

1. After the implementation of Ind AS in the insurance industry, investors gained trust and confidence in the financial health of the insurance companies. This is because of the transparency and comparability of the financial statements of insurance companies. Thus, it results in more investment for the companies.
2. 2.Because of the thorough reporting, Ind AS helped insurers improve how they handle risk and how they talk about risk. As a result, risk control and relief methods are made better.
3. Indian insurance companies can fight on the world market now that they are in line with IFRS. It’s easy to make investments around the world and find new ways to do things.

Questions to Understand your ability

Ques1: Indian Accounting Standards (Ind AS) are aligned with:

1. Generally Accepted Accounting Principles (GAAP)
2. International Financial Reporting Standards (IFRS)
3. Financial Accounting Standards Board (FASB)
4. International Accounting Standards Board (IASB)

Ques2: Which Ind AS standard covers insurance contracts?

1. Ind AS 109
2. Ind AS 104
3. Ind AS 32
4. Ind AS 107

Ques3: What’s a major challenge for insurance companies switching to Ind AS?

1. More trust from investors
2. Needing advanced actuarial models
3. Better risk management
4. Competing globally

Ques4: Ind AS 109 deals with:

1. Insurance contracts
2. Financial instruments’ presentation and disclosures
3. Categorization, measurement, and impairment of financial instruments
4. Employee benefits

Ques5: An opportunity from implementing Ind AS in insurance is:

1. Less transparency
2. Less need for tech investments
3. Competing on a global level
4. Simpler actuarial models

Conclusion

 Acquiring Ind AS for the insurance industry with challenges holds several benefits, like transparency, comparability, and investor trust. Insurers may sometimes feel the burden of the complexities of this system, but it paves the path for more growth and opportunities. Global investment is made possible with IFRS, which is aligned with Ind AS.