IRDAI Forms Working Groups for Risk-Based Capital Framework Convergence with IndAS for Insurers

The news

The Insurance Regulatory and Development Authority of India (IRDAI) has constituted separate working groups for life and non-life insurers to converge the proposed Risk-Based Capital (RBC) framework with Indian Accounting Standards (IndAS). The regulator announced the move on November 11, 2026, and said the working groups must prepare an exposure draft of RBC regulations and an associated approach paper within one month.

Under the new framework, IndAS financial statements will form the starting point and basis for RBC, with clearly defined, transparent and evidence-based adjustments wherever necessary for the prudential objectives of RBC, IRDAI said. The objective is to achieve a coherent convergence so that a single set of underlying data, models and assumptions of the valuation framework serves as the base. The resulting RBC framework, the regulator said, will be transparent, comparable across insurers, resistant to arbitrage, proportionate and implementable within a realistic transition path.

IRDAI has set in motion the transition from the current factor-based solvency regime to the RBC framework, under which an insurer's capital requirement will be commensurate with the risks it carries, measured on an economic (market-consistent) balance sheet. Earlier this year, the regulator advised insurers to prepare and present financial statements in accordance with IndAS with effect from April 1, 2026. In its communication, IRDAI said having separate, unconnected bases would impose duplicative costs on insurers, introduce reconciliation complexity and create room for inconsistent outcomes and regulatory arbitrage. The convergence, it added, will neither dilute the prudential purpose of RBC—policyholder protection at a defined confidence level—nor distort IndAS objectives of faithful representation.

What is the current solvency regime and why the shift?

India's insurance sector currently follows a factor-based solvency regime, where capital requirements are determined by prescribed factors rather than the actual risk profile of the insurer. The shift to a Risk-Based Capital framework will make capital requirements commensurate with the risks an insurer carries, measured on an economic (market-consistent) balance sheet. IRDAI had earlier advised insurers to adopt IndAS from April 1, 2026, setting the stage for this convergence.

What are the benefits and safeguards of convergence?

Converging RBC with IndAS ensures a single set of underlying data, models and assumptions, eliminating the need for separate, unconnected bases. This will lower compliance costs for insurers, reduce reconciliation complexity and prevent inconsistent outcomes and regulatory arbitrage, according to IRDAI. The regulator has clarified that the convergence will not dilute the prudential objective of policyholder protection at a defined confidence level, nor will it distort IndAS's goal of faithful representation.

What is the next step and timeline?

The working groups have a one-month deadline to produce an exposure draft of RBC regulations and an associated approach paper, according to IRDAI Chief General Manager (Actuarial & RBC) C. Srinivasa Kumar. Once finalised, the RBC framework will be implemented with a realistic transition path.