Indian insurers seek IRDAI bond valuation reform to boost market liquidity

Indian insurance companies are urging the IRDAI (Insurance Regulatory and Development Authority of India) to implement reforms in bond valuation norms. Currently, insurers are required to value their bond portfolios at market value, which introduces volatility into their balance sheets, especially during periods of interest rate fluctuations.

Insurers are advocating for a "hold-to-maturity" (HTM) accounting method for a portion of their bond holdings. Under HTM, bonds are valued at their acquisition cost rather than market price, as long as the insurer intends to hold them until maturity. This change would significantly reduce the impact of short-term market fluctuations on their financial statements, providing greater stability and predictability. The proposed reform aims to align Indian accounting practices more closely with global standards and ensure that insurers, who often hold bonds for long durations to match their liabilities, are not unfairly penalized by market movements.