Ind AS 117 Insurance explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 117 sets the accounting for insurance contracts: what counts as one, how contracts are grouped, how a group is measured and how the results appear in the financial statements. It matters to insurers, but its scope paragraphs also reach other companies that give warranties, guarantees or fixed-fee service promises.
An insurance contract is one in which the issuer accepts significant insurance risk from a policyholder by agreeing to compensate for a specified uncertain future event. Contracts are grouped by portfolio, profitability and issue year (paragraphs 14 to 24). The general model measures a group at fulfilment cash flows (estimates, discounting and a risk adjustment) plus a contractual service margin (CSM), the unearned profit released as service is given (paragraphs 32 and 38). A group may use the simpler premium allocation approach if coverage is one year or less, or the result would not differ materially (paragraph 53).
Ind AS as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015). Amendments notified after 1 April 2025 are not reflected in this article; check mca.gov.in before applying it to a later period.
Who applies it and from when
The footnote to Ind AS 117 says it was notified by G.S.R. 492(E) dated 12 August 2024. It adds that, by G.S.R. 602(E) dated 28 September 2024, an insurer or insurance company may provide its financial statements as per Ind AS 104 for the purposes of consolidated financial statements by its parent, investor or venturer until the Insurance Regulatory and Development Authority notifies Ind AS 117, and for that purpose Ind AS 104 continues to apply. The footnote to Ind AS 104 says that standard was omitted by G.S.R. 492(E) and re-instated by G.S.R. 602(E), and refers back to the Ind AS 117 footnote. This article states nothing beyond those printed words about who applies which standard; our post on Ind AS 104 gives the earlier standard's outline.
Paragraph C1 says an entity applies Ind AS 117 for annual reporting periods beginning on or after 1 April 2024, early adoption is permitted, and an insurance company may adopt early only for consolidation by its parent.
Scope for non-insurers
Ind AS 117 applies to insurance contracts the entity issues, reinsurance it holds, and investment contracts with discretionary participation features if the entity also issues insurance contracts (paragraph 3). It does not apply to manufacturer, dealer or retailer warranties (paragraph 7(a), where Ind AS 115 applies), employee benefit plans, residual value guarantees in leases, or contingent consideration in a business combination. A financial guarantee contract stays under Ind AS 32, 107 and 109 unless the issuer has previously asserted explicitly that it regards such contracts as insurance and has used insurance accounting, with a contract-by-contract irrevocable choice (paragraph 7(e)). A contract whose primary purpose is services for a fixed fee may be accounted for under Ind AS 115 if three conditions are met (paragraph 8), and loans that limit compensation to the borrower's obligation can follow Ind AS 117 or Ind AS 109, chosen by portfolio (paragraph 8A). The related ITFG points on guarantees appear in our ITFG digest on Ind AS 109 and 107.
A non-insurer with warranty-style or guarantee-style promises should record which paragraph 7 or 8 route it has taken. Our virtual CFO services team can help prepare that scoping note.
Grouping
An entity identifies portfolios of contracts with similar risks managed together (paragraph 14) and divides each into at least a group onerous at initial recognition, a group with no significant possibility of becoming onerous, and the rest (paragraph 16). Contracts issued more than one year apart cannot be in the same group (paragraph 22), and groups are not reassessed afterwards (paragraph 24).
What the paragraphs require
| Paragraph | Requirement | What it means in practice |
|---|---|---|
| Ind AS 117, 25 | Recognise a group from the earliest of coverage start, first payment due, or the group becoming onerous | The date is usually the coverage start |
| 32 | Initial measurement: fulfilment cash flows plus CSM | Two building blocks |
| 33, 34 | Unbiased probability-weighted cash flows within the contract boundary | Only future service, not future contracts |
| 36, 37 | Discount for time value and financial risk; risk adjustment for non-financial risk | Discount rate reflects the cash flows' characteristics |
| 38 | CSM set so that no income or expense arises on initial recognition | No day-one profit |
| 40 to 44 | Carrying amount is remaining coverage plus incurred claims; CSM rolls forward with accretion and release | Release matches service given |
| 47 to 52 | Onerous groups: loss recognised at once, loss component tracked | No CSM when onerous |
| 53 to 59 | PAA for coverage of one year or less, or no material difference | Simplified liability for remaining coverage |
| 78 to 85 | Separate balance sheet lines for issued and held contracts; insurance service result and insurance finance income or expenses | Revenue excludes investment components |
Worked example
The entity and all figures in this example are invented for illustration. Amounts are in ₹ lakh. Discount rates, loss ratios and risk adjustments are assumed, for arithmetic only. Alaknanda Cover Limited is an invented issuer, and no regulatory capital or tax effect is shown.
Part A: a one-year group under the premium allocation approach. On 1 October 2026 the entity issues 1,000 one-year contracts, so paragraph 53(b) allows the PAA. It receives premiums of ₹600.00 lakh and pays acquisition costs of ₹60.00 lakh, which it capitalises (paragraph 55(a)(ii)). Expected claims are ₹420.00 lakh for the year. By 31 March 2027, half the coverage is over; claims incurred are ₹215.00 lakh and paid ₹150.00 lakh. Claims are expected to settle within a year, so no discounting is applied (paragraph 59(b)).
| Liability for remaining coverage (paragraph 55) | ₹ lakh |
|---|---|
| Premium received on 1 October 2026 | 600.00 |
| Less acquisition cash flows | (60.00) |
| Initial carrying amount | 540.00 |
| Add amortisation of acquisition costs to 31 March (60.00 x 6/12) | 30.00 |
| Less insurance revenue for six months (600.00 x 6/12) | (300.00) |
| Closing at 31 March 2027 | 270.00 |
Check: unearned premium 300.00 less unamortised acquisition costs 30.00 equals 270.00. Onerous test (paragraph 57): fulfilment cash flows for remaining coverage are expected claims 420.00 less incurred 215.00 = 205.00, below 270.00, so there is no loss.
| Statement of profit and loss, six months | ₹ lakh |
|---|---|
| Insurance revenue | 300.00 |
| Incurred claims | (215.00) |
| Amortised acquisition costs | (30.00) |
| Insurance service result | 55.00 |
| Particulars | Debit (₹ lakh) | Credit (₹ lakh) |
|---|---|---|
| Bank | 600.00 | |
| To Insurance contract liability (remaining coverage) | 600.00 | |
| Insurance contract liability (remaining coverage) | 60.00 | |
| To Bank (acquisition costs) | 60.00 | |
| Insurance contract liability (remaining coverage) | 300.00 | |
| To Insurance revenue | 300.00 | |
| Insurance service expenses (amortisation) | 30.00 | |
| To Insurance contract liability (remaining coverage) | 30.00 | |
| Insurance service expenses (claims) | 215.00 | |
| To Bank | 150.00 | |
| To Liability for incurred claims | 65.00 |
Check: debits 600.00 + 60.00 + 300.00 + 30.00 + 215.00 = 1,205.00 equal credits 600.00 + 60.00 + 300.00 + 30.00 + 150.00 + 65.00 = 1,205.00. The liability for remaining coverage closes at 270.00 plus incurred claims of 65.00, a total of ₹335.00 lakh.
Part B: a three-year group under the general model, in outline. On 1 April 2026 the entity issues contracts for a single premium of ₹900.00 lakh. Expected claims, paid at each year-end, are 200.00, 210.00 and 220.00, a total of 630.00. The discount rate is 6 per cent (assumed), the risk adjustment is 40.00 and the CSM is released evenly by coverage units (a third, then a half, then the rest of what remains).
| Initial measurement (paragraphs 32 to 38) | ₹ lakh |
|---|---|
| Claims: 200.00 x 0.9434 + 210.00 x 0.8900 + 220.00 x 0.8396 | 560.29 |
| Risk adjustment | 40.00 |
| Fulfilment cash flows | 600.29 |
| CSM (900.00 - 600.29) | 299.71 |
Check: fulfilment cash flows 600.29 plus CSM 299.71 equal the premium of 900.00, so no income arises on day one.
| CSM roll-forward (paragraph 44) | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Opening | 299.71 | 211.79 | 112.25 |
| Interest at 6% | 17.98 | 12.71 | 6.74 |
| Release (1/3, 1/2, rest) | (105.90) | (112.25) | (118.99) |
| Closing | 211.79 | 112.25 | nil |
| Result by year | Year 1 | Year 2 | Year 3 | Total |
|---|---|---|---|---|
| Expected claims | 200.00 | 210.00 | 220.00 | 630.00 |
| Risk adjustment released | 13.33 | 13.33 | 13.34 | 40.00 |
| CSM released | 105.90 | 112.25 | 118.99 | 337.14 |
| Insurance revenue (B121) | 319.23 | 335.58 | 352.33 | 1,007.14 |
| Insurance service expenses (claims) | (200.00) | (210.00) | (220.00) | (630.00) |
| Insurance service result | 119.23 | 125.58 | 132.33 | 377.14 |
| Insurance finance expense: claims unwinding | (33.62) | (23.63) | (12.46) | (69.71) |
| Insurance finance expense: CSM interest | (17.98) | (12.71) | (6.74) | (37.43) |
| Result before investment income | 67.63 | 89.24 | 113.13 | 270.00 |
Check: total revenue 1,007.14 equals the premium of 900.00 plus finance expense of 107.14 (the financing effect in B120). The total result of 270.00 equals premium 900.00 less claims 630.00. The claims liability unwinds to nil: 560.29 + 69.71 - 630.00.
Presentation and disclosure
The balance sheet shows portfolios of issued contracts that are assets and liabilities, and reinsurance held, separately (paragraph 78). Profit or loss splits into the insurance service result and insurance finance income or expenses (paragraph 80), and revenue excludes investment components (paragraph 85). Disclosures run through paragraphs 93 to 132. For the Ind AS measurement basis of fair values used in estimates, see the Ind AS 113 guide.
Difference from IFRS
The standard's comparison appendix says IFRS 17 applies globally from 1 January 2023 and Ind AS 117 in India from 1 April 2024, with an insurance company allowed early application for consolidation purposes only. It also notes the omitted reference to IAS 26 in paragraph 7(b), the retained paragraph 27 number, amended wording in paragraphs B95A and B95C for the bargain purchase carve-out, and different transitional wording for Ind AS 109. See also the Ind AS and IFRS comparison.
Need help with Ind AS 117?
Grouping, discount rates and CSM roll-forwards are modelling tasks. Our virtual CFO services team can help scope Ind AS 117 for your group and build the measurement workbook with your finance team.
Key takeaways
- An insurance contract needs significant insurance risk from a policyholder.
- Group by portfolio, profitability and issue year; do not reassess groups.
- The general model is fulfilment cash flows plus a CSM; no day-one profit.
- The PAA suits coverage of one year or less.
- Revenue excludes investment components; finance effects sit below the service result.
- Non-insurers should record which scope route applies to warranties, guarantees and fixed-fee services.
Read next
- Ind AS v IFRS: carve-outs, carve-ins and other differences standard by standard
- ITFG clarifications on Ind AS 109 and 107: financial guarantees, loans, security deposits and processing fees
- Fair value measurement under Ind AS 113
Disclaimer: Based on the Indian Accounting Standards as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015) and, where named, the ITFG clarification bulletins of ICAI, as consulted on 4 October 2026. The worked example uses invented figures. Amendments notified after 1 April 2025 should be checked on mca.gov.in. This article is general information, not legal advice; check the official text before acting.