IRDAI Constitutes Life and Non-Life Working Groups for Risk-Based Capital and Ind AS Convergence

Summary: The Insurance Regulatory and Development Authority of India (IRDAI), through Office Order Ref. No. IRDAI/RBC/ORD/MISC/150/11/2026 dated 10 November 2026, has constituted separate working groups for life and non-life insurance to develop a converged Risk-Based Capital (RBC) framework aligned with Indian Accounting Standards (Ind AS). The initiative supports the proposed transition from factor-based solvency requirements to a risk-sensitive capital framework under which insurers’ capital requirements reflect their underlying risks. Following the notification of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) (Amendment) Regulations, 2026 on 30 March 2026, the Authority proposes using Ind AS financial statements as the starting point for RBC calculations, subject to transparent and justified prudential adjustments. The working groups must prepare an exposure draft of RBC regulations, an approach paper evaluating alternative methodologies and a regulatory reporting template. Their scope includes asset and liability valuation, capital eligibility, required capital, risk aggregation, discounting, expected credit losses, contractual service margins, risk adjustments, solvency ratios, supervisory intervention, governance, disclosure and transitional arrangements. Recommendations must be supported by data, quantified impact assessments and sensitivity testing. The groups will also examine actuarial valuation under Sections 13 and 49 and supervisory requirements under Section 64VA of the Insurance Act, 1938. Jamuna Choudhary will serve as Member Convener of the Life Working Group, while Parmeshwar Shelke will convene the Non-Life Working Group. Meetings may be conducted physically, virtually or in hybrid mode, with a minimum quorum of 50% for each group. Joint sittings may be held to ensure consistency, and all proceedings and documents must remain confidential. Both groups must submit their deliverables within one month of the Office Order. The order initiates the drafting and consultation process and does not itself bring the proposed RBC regime into force.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

Ref No.: IRDAI/RBC/ORD/MISC/150/11/2026 | Dated: 10 November, 2026

OFFICE ORDER

Constitution of Working Groups on Convergence of the Risk Based Capital (RBC) Framework with the Indian Accounting Standards (IndAS)

1. The Authority is in the process of transitioning the Indian insurance sector from the existing factor-based solvency regime to a Risk Based Capital (RBC) framework, under which the capital requirement of an insurer is to be commensurate with the risks it carries, measured on an economic (market-consistent) balance sheet.

2.  Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers), (Amendment) Regulations, 2026 were notified on 30^th March, 2026 wherein the financial statements are prepared and reported in accordance with applicable Indian Accounting standards (IndAS), principles and policies.

3. Both frameworks are built on the measurement of current estimates of future cash flows, discounting, and explicit allowance for risk. Running the two frameworks on separate, unconnected bases would impose duplicative cost on insurers, introduce reconciliation complexity, and create room for inconsistent outcomes and regulatory arbitrage.

4. In this background the effective approach could be that the Ind AS financial statements shall form the starting point and basis for RBC, with clearly defined, transparent, and evidence-based adjustments, wherever the prudential objectives of RBC, so necessitate.

5. To give effect to this approach and to develop the necessary regulatory instruments, the Competent Authority has approved the constitution of two Working Groups (‘WGs’), as set out in Annexures 1 and 2.

6. Jamuna Choudhary and Mr. Parmeshwar Shelke shall be Member Conveners of Life and Non-Life WG, respectively.

7. The WGs shall function in close coordination. Matters common to both life and non-life business may be deliberated in joint sittings, whenever necessary, of the two WGs so that a single, consistent position emerges for the industry.

8. The WGs shall meet as frequently as necessary to complete the work within the timeline.

9. The quorum for a meeting of each WG shall be at least 50% of its members. The quorum for a joint sitting shall be at least 50% of the members of each WG separately.

10. Meetings may be held in physical, virtual or hybrid mode; participation through video-conferencing shall count towards quorum.

11. In addition to or in absence of the Appointed Actuaries or the Chief Financial Officers, the Valuation Actuaries or the Deputy Chief Financial Officer of the respective insurer may be authorized to attend the meeting of the WGs.

12. The WGs may co-opt or invite any expert/official, as may be considered necessary.

13. All deliberations, data, drafts and documents of the WGs are strictly confidential and shall not be disclosed, shared or used for any purpose other than the work of the WGs.

14. Objectives of the Working Groups are as under:

a. To achieve a coherent convergence of the RBC framework with IndAS, using the IndAS financial statements as the basis for RBC, so that a single set of underlying data, models and assumptions, of valuation framework, serves both purposes to the maximum extent. The resulting RBC framework shall be transparent, comparable across insurers, resistant to arbitrage, proportionate, and implementable within a realistic transition path.

b. To prepare the Exposure Draft of the RBC Regulations and an associated Approach Paper.

15. Guiding Principles for the Working Groups are as under:

a. The proposed framework shall not lose sight of the objectives and the integrity of the principles of both frameworks. Convergence shall neither dilute the prudential purpose of RBC (policyholder protection at a defined confidence level), nor distort Ind AS objectives (faithful representation).

b. While IndAS allows various choices for insurers, the WGs need to investigate the possibility of narrowing in on them based on data and outcomes, without curtailing the reasoned flexibility of the options available to the insurers.

c. A standard approach shall be adopted across the industry, however, where any divergent approach is possible, the WG shall attempt to bridge the divergence by defining the level of governance and the methods of monitoring the divergence.

d. Every recommendation shall be backed by analysis, data and quantified impact, including sensitivity testing.

16. The Terms of Reference of the Working Groups are as under: a. To prepare the Exposure Draft of the RBC Regulations, suitable for issue for public consultation, under which the IndAS financial statements shall be the basis for the RBC Balance Sheet. The Exposure Draft shall, inter alia, provide for the following in consideration of the converged approach

a. definitions, applicability and commencement;

i. the valuation of assets and liabilities for the RBC Balance Sheet, starting from IndAS carrying values, with an exhaustive list of permitted and mandatory adjustments, wherever necessary;

ii. the determination of Available Capital, including its classification into tiers and eligibility limits, wherever necessary, for IndAS based financial statements;

iii. the determination of Required Capital, including risk modules, calibration standard, aggregation and diversification;

iv. appropriate treatment and approach for key components for RBC as derived from IndAS based financial statements — Debt Securities & ECL, Grouping, Initial Recognition, Contract Boundary, Valuation of Properties, Discounting, Contractual Service Margin (CSM), Risk Adjustment for non-financial risk, loss component, Insurance Acquisition Cash Flows, and reinsurance contracts held;

v. solvency ratio, supervisory intervention levels and the ladder of supervisory action as per Section 64VA of the Insurance Act, 1938;

vi. governance, actuarial and Board responsibilities, use of internal or entity-specific approaches (if any), validation and audit;

vii. reporting, public disclosure and data-submission requirements;

viii. transitional provisions and the phased implementation path; and

ix. consequential amendments required to other existing regulations of the Authority.

b. To prepare an Approach Paper setting out recommendations covering all possible scenarios, alternative approaches and their consequences, including but not limited to:

i. Sensitivity testing — sensitivity of Available Capital, Required Capital and the solvency ratio to each key assumption and methodological choice;

ii. Ranges — where a single prescribed value is not appropriate, recommended acceptable ranges (e.g. for confidence levels, cost-of-capital rates, illiquidity premium, lapse or expense assumptions), with criteria for positioning within the range;

iii. Materiality — quantitative and qualitative materiality thresholds for adjustments, simplifications, disclosures and changes in approach;

iv. Discounting — construction of the risk-free yield curve, reference instruments, extrapolation beyond the last liquid point, ultimate forward rate (if any), currency and the top-down versus bottom-up approach;

v. Flooring — whether and at what level (contract, group, portfolio or entity) negative best-estimate liabilities or negative CSM should be floored, and the treatment of surrender value floors, UPR etc;

vi. Risk margin — scope of alignment between RBC’s risk margin with IndAS’s Risk Adjustment;

vii. Illiquidity premium — necessity and appropriateness of illiquidity premium; and any other area where alternative approaches are possible.

c. To prepare draft template for submission of RBC data by insurers to the Authority, covering the RBC Balance Sheet, the Ind AS-to-RBC reconciliation, Available and Required Capital by module, sensitivities, assumptions, and qualitative information.

d. To make recommendations on adopting the converged framework for actuarial valuation of assets and liabilities under Section 13 and 49 of Insurance Act, 1938.

e. Assess requirement of recalibration and recommend stress factors and additional accounting information required based on IndAS valuation.

f. Examine the treatment of foreign business under RBC vis-à-vis requirements of respective foreign jurisdictions.

g. To examine any other matter incidental to, or connected with, the above, or as may be referred to the WGs by the Authority, to ensure a well calibrated approach for implementation of RBC overlapping IndAS approach

17. The WGs shall complete their work and submit all deliverables within one (1) month from the date of issue of this Office Order.

18. This is issued with the approval of the Competent Authority.

Sd/-

(C. Srinivasa Kumar)

(CGM (Actuarial & RBC)

Annexure 1: Working Group – Life

Annexure 2: Working Group – Non-Life