Actuaries in insurance audits in India: Detailed FAQs

Background

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As mentioned in our earlier article, actuarial liabilities have now been brought within the scope of statutory audits in India for Ind AS financial statements.

The valuation of actuarial liabilities and their accounting under standards such as IFRS 4/17 (or the Indian equivalent Ind AS 117) requires complex technical calculations and expert judgement. These areas lie outside most auditors’ areas of expertise.

Therefore, in many markets across the world, auditors engage actuaries to help them understand and form an opinion on these aspects. It is envisaged that a similar practice will now evolve in India, and the Institute of Actuaries of India (IAI) has drafted a Guidance Note to guide the new “Auditing Actuaries” on carrying out their roles as auditors’ experts.

This article aims to provide in-depth answers to frequently asked questions regarding this new category of engagements.

What has changed for insurance company audits in India?

For Ind AS financial statements, actuarial liabilities are no longer scoped out of statutory audit.

The carve-out that earlier protected actuarial liabilities from audit is in IRDAI’s AFI Regulations,¹ Schedule II Part III para 1(5) of which states that the auditor’s report shall deal with (among other matters):

Whether the actuarial valuation of liabilities is duly certified by the appointed actuary including to the effect that the assumptions for such valuation are in accordance with the guidelines and norms, if any, issued.

For over 25 years,² this wording has been interpreted by Indian auditors and the wider Indian insurance industry to mean that auditors have no responsibility to opine on the actuarial liabilities, and merely need to verify that they have been certified by the Appointed Actuary, the very person responsible for calculating them in the first place.

Under the 2026 AFI amendment Regulations³ which introduced Ind AS, Schedule II is replaced by Schedule IIA for insurers reporting under Ind AS. This Schedule has no equivalent clause to Sch II part III para 1(5).⁴

With the removal of this carve-out, the auditors’ responsibility to opine on whether the insurance company’s financial statements represent a true and fair view now encompasses the actuarial liabilities as well.

When do these changes come into effect?

These audit requirements come into effect along with the adoption of Ind AS as the basis for preparing Financial Statements.

Ind AS reporting became applicable for insurance companies on 1 April 2026⁵⁶, with insurance companies having the option to seek deferral for a year from IRDAI, for an adoption date of 1 April 2027.

In practice, this means that for the insurance companies who have adopted Ind AS reporting as on 1 April 2026, the actuarial liabilities are already within audit scope. For the remaining insurance companies (the large majority), this requirement becomes effective on 1 April 2027 along with Ind AS reporting.

However, Ind AS adoption for insurance companies requires restating the previous year’s comparative figures as well. Even insurance companies adopting Ind AS in April 2027 may therefore find it useful to start some preparatory work for Ind AS audits immediately, as the ongoing FY 2026-27 will need to be restated to Ind AS.

Ind AS statements prepared before Ind AS adoption are not subject to audit, so this change is not applicable to them. Such statements include Ind AS “Financial Information” as defined in the IRDAI circular⁵ and pro forma financial statements as per earlier IRDAI letters. Such statements are subject to limited review as per ICAI norms along with certification by an Independent Actuary. The scope of this work or extent of this certification has not been detailed by IRDAI, IAI, or any other body; however, this is a temporary arrangement that will not be applicable for reporting for 1 April 2027 and beyond.

What is an Auditing Actuary?

This response is based on a draft GN circulated by IAI for comments. The final provisions may differ.

Auditors generally do not have the appropriate expertise to review actuarial liabilities. Under IFRS 17 / Ind AS 117, the actuarial liabilities also unwind into the P&L and OCI as insurance revenue, insurance service expense, and insurance finance expense. These components may also be difficult for auditors to review without a deep understanding of the underlying liabilities.

Given that such liabilities and their unwinding represent a large portion of insurance companies’ financial statements, the same should be reviewed by someone with appropriate expertise to understand the company’s calculations and challenge them where appropriate.

Therefore, globally, auditors engage actuaries as “auditor’s experts” (or sometimes employ them as “auditor’s specialists”) to assist them in reviewing actuarial liabilities/actuarial assets or the corresponding line items in the P&L/OCI.

With the change in audit requirements, there is a need to replicate such arrangements in India.

IAI has accordingly drafted a Guidance Note (GN) for “actuaries supporting the audit of insurance companies under Ind AS 117”. As per this draft GN:

“Auditing Actuary” means an actuary who, in accordance with SA 620 Using the Work of an Auditor’s Expert⁷, performs actuarial work in support of the audit of the financial statements of an insurance company prepared in accordance with Ind AS 117. The Auditing Actuary will be external to the insurance company or the companies in the same group, and will be a person who is not a member of the Audit Firm — though may be a member of the same network firm. For the purposes of this GN, references to the Auditing Actuary include the actuarial firm through which the Auditing Actuary performs the actuarial work.

To what extent can auditors rely on the Auditing Actuary’s work?

SA 620⁷ issued by the Institute of Chartered Accountants of India (ICAI) is clear on this:

The auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditor’s use of the work of an auditor’s expert. Nonetheless, if the auditor using the work of an auditor’s expert, having followed this SA, concludes that the work of that expert is adequate for the auditor’s purpose, the auditor may accept that expert’s findings or conclusions in the expert’s field as appropriate audit evidence. (Para 3. Emphasis added.)

The Auditing Actuary serves only as an auditor’s expert under both ICAI’s SAs (Standards on Auditing) and IAI’s draft Guidance Note, and therefore functions purely as an advisor to the auditor.

The auditor needs to assess whether the auditor’s expert has the necessary competence, capabilities and objectivity (para 9), agree on the division of responsibility with the auditor’s expert (para 11), and evaluate the adequacy of the expert’s work (para 12).

For this purpose, the auditor needs to obtain a sufficient understanding of the expert’s field of expertise (in this case, actuarial valuation and Ind AS 117) to allow the auditor to properly scope and evaluate the expert’s work (para 10).

However, the auditor’s evaluation would generally not involve re-performing the expert’s work. As per SA 620 para 12:

The auditor shall evaluate the adequacy of the auditor’s expert’s work for the auditor’s purposes, including: (a) The relevance and reasonableness of that expert’s findings or conclusions, and their consistency with other audit evidence; (b) If that expert’s work involves use of significant assumptions and methods, the relevance and reasonableness of those assumptions and methods in the circumstances; and (c) If that expert’s work involves the use of source data that is significant to that expert’s work, the relevance, completeness and accuracy of that source data.

(These are detailed further in paras A32-A39 of the SA.)

As Auditing Actuaries are auditor’s experts external to the auditor, their working papers will generally not be part of audit documentation as per para A29. In practice, the documentation required from the expert is generally a detailed report covering the assumptions, the procedures performed, and the results of the procedures.

To maintain the integrity of the data used (as per para 12(c)), the Auditing Actuary also needs to keep the auditor informed about the data being used. Best practice is for the auditor to validate the data in parallel rather than after receiving the Auditing Actuary’s report. However, para A39 also includes a provision for the expert to test the source data and the auditor to review the test results.

What portions of the financial statements will the Auditing Actuary review?

Globally, for actuaries appointed as auditor’s experts of insurance companies, the scope of work for actuaries is restricted to IFRS 17. (It may extend to IFRS 2 or IAS 19, but those are separate scope items and not specific to insurance companies.)

However, the actuary’s exact scope of work within IFRS 17 varies across engagements and countries, and depends to a large extent on the auditor’s own areas of expertise.

The actuary may be responsible for reviewing all the insurance-related line items across the balance sheet and P&L / OCI. Alternatively, in a general insurance PAA context, the actuary may be responsible only for reviewing the liability for incurred claims (LIC), with all the P&L items being reviewed by the auditor directly.

Confirmed receivables and payables (as opposed to mathematical / technical reserves, which are actuarially calculated) nearly always lie outside the actuary’s scope.

Further, the extent of independent recomputation required varies based on each audit firm’s internal guidelines, and the ever-present need to balance cost with level of assurance required.

The remainder of this response is based on a draft GN circulated by IAI for comments. The final provisions may differ.

In line with global practice, IAI’s draft GN is specific to Ind AS 117 and does not prescribe a specific scope of work for Auditing Actuaries. It states instead that the scope should be determined and documented before the actuarial work commences, and any subsequent variances should be communicated to the auditor and the insurance company.

However, the draft GN does dive into the objectives and procedures for a few areas, which may be treated as indicative scope items for the Auditing Actuary’s Ind AS 117 review: data, assumptions, methodology (with specific items listed), models, CSM, risk adjustment, discount rate, cash flows/contract boundary, reinsurance contracts held, and disclosures. It also includes detailed guidance on the review of transition to Ind AS.

The choice to include data validation, reconciliation, and lineage within this indicative scope for the Auditing Actuary is interesting, given that SA 620⁷ indicates that the auditor is directly responsible for validating the data:

The auditor shall evaluate the adequacy of the auditor’s expert’s work for the auditor’s purposes, including: […] if that expert’s work involves the use of source data that is significant to that expert’s work, the relevance, completeness and accuracy of that source data. (Para 12(c))

Globally, data validation etc. generally lies in the auditor’s scope and not the expert’s. This is therefore an area where we may expect to see a change in the final GN.

The draft GN also does not specify what items need to be independently recomputed. This is instead left to the Auditing Actuary’s judgement, subject to practical considerations.

What conflict & independence requirements are Auditing Actuaries subject to?

This response is based on a draft GN circulated by IAI for comments. The final provisions may differ.

Given the criticality of Ind AS 117 figures to insurance companies’ financial statements, IAI’s draft GN includes a number of measures to ensure that Auditing Actuaries are independent of the insurance company and free of conflicts of interest. These are comparable to the independence/conflict requirements applicable to auditors themselves.

Some of these requirements are:

• No financial interest: The Auditing Actuary, his/her spouse and dependent children, the actuarial firm through which the Auditing Actuary performs the engagement, his/her/the firm’s partners, directors, and employees with influence over the engagement, cannot have any direct/material indirect financial interest in the insurance company or any of its group companies, or accept any loans or borrowings guaranteed by the insurance company or any of its group companies (except immaterial loans under normal commercial terms).
• Family and personal relationships: There is a requirement to disclose, in writing, prior to the acceptance of the engagement, any personal/family relationships between the Auditing Actuary/any partner in his actuarial firm with influence over the engagement and any director, senior manager, or KMP of the insurance company. Engagements cannot be accepted where the Auditing Actuary/actuarial firm partner’s immediate family member has a significant influence over the financial or actuarial reporting process at the insurance company.
• No other assignments: An actuary who was associated with an insurance company as an employee, Appointed Actuary, consultant, advisor, etc. cannot serve as Auditing Actuary of the company.
• Cooling-off period: An actuary who was associated with an insurance company (as above) cannot work as its Auditing Actuary for one year after the association ends.
• Rotation: An actuary and/or actuarial firm can work as Auditing Actuary for an insurance company for at most four consecutive financial years. Afterwards, there is a cooling-off period of three financial years for reappointment. This is aligned with the rotation period for statutory auditors.⁸
• Cap on number of companies: An actuary/actuarial firm cannot act as Auditing Actuary for more than three insurance or reinsurance companies concurrently.
• Fees and fee dependence: Auditing Actuary’s fees cannot be contingent on the outcome of the actuarial work or on the opinion issued by the auditor. Where the fees from the engagement represent a significant portion of the actuarial firm’s fees, an independent quality review of the engagement work is recommended.
• Non-assurance services: The Auditing Actuary and his actuarial firm cannot have provided any non-audit services which may create a self-review threat (e.g. support with Ind AS conversions) for the 2 years preceding the audit period.

It bears mentioning that IAI GNs are recommendatory in nature and not binding. However, over time various stakeholders (IRDAI, insurance company Boards/Audit Committees, institutional investors, and auditors) may come to expect all Auditing Actuaries to adhere to the GN, thereby mandating compliance with the above independence and conflict requirements.

What qualifications must the Auditing Actuary have?

This response is based on a draft GN circulated by IAI for comments. The final provisions may differ.

As per IAI’s draft GN, an Auditing Actuary must be a Fellow of the Institute of Actuaries of India and hold a Certificate of Practice in the relevant practice area. He/she should ideally meet IRDAI’s eligibility criteria for an Appointed Actuary in the relevant practice specialty.

Where the engagement is performed by a team of actuaries led by the Auditing Actuary, the team as a whole should have the competence, capability and practice specialty necessary for the engagement.

It bears mentioning that IAI GNs are recommendatory in nature and not binding. However, over time various stakeholders (IRDAI, insurance company Boards/Audit Committees, institutional investors, and auditors) may come to expect all Auditing Actuaries to adhere to the GN, thereby mandating compliance with the above qualification requirements.⁹

Is it mandatory to appoint an Auditing Actuary?

No.

As per para A6-A8 of ICAI’s SA 620,⁷ the auditor’s engagement partner (the partner leading the audit engagement) is required to be satisfied that the engagement team has the necessary capabilities to perform the audit, and to appoint an auditor’s expert (in this case, an Auditing Actuary) if they do not.

Para A7 lists out circumstances in which an auditor, despite lacking actuarial expertise, may nonetheless have enough of an understanding to perform the audit without an expert:

An auditor who is not an expert in a relevant field other than accounting or auditing may nonetheless be able to obtain a sufficient understanding of that field to perform the audit without an auditor’s expert. This understanding may be obtained through, for example:

• Experience in auditing entities that require such expertise in the preparation of their financial statements.
• Education or professional development in that particular field. This may include formal courses, or discussion with individuals possessing expertise in the relevant field for the purpose of enhancing the auditor’s own capacity to deal with matters in that field. Such discussion differs from consultation with an auditor’s expert regarding a specific set of circumstances encountered on the engagement where that expert is given all the relevant facts that will enable the expert to provide informed advice about the particular matter.
• Discussion with auditors who have performed similar engagements.

That said, Ind AS 117 figures will be a significant component in insurance companies’ financial statements, and it is not feasible to adequately challenge those figures without expert actuarial knowledge. For this reason, global practice favours engaging actuaries as auditor’s experts for reviewing Ind AS 117 figures.

Given this context, over time various stakeholders (IRDAI, SEBI, NFRA, insurance company Boards/Audit Committees, and institutional investors) may come to expect the involvement of Auditing Actuaries in audits of at least large or listed insurance companies.⁹

Who engages the Auditing Actuary?

The Auditing Actuary is, effectively, the auditor’s advisor and is appointed based on the auditor’s judgement, as indicated in the responses to “To what extent can auditors rely on the Auditing Actuary’s work?” and “Is it mandatory to appoint an Auditing Actuary?”.

As such, it is logical for the auditor to appoint and remunerate the Auditing Actuary.

In India, insurance companies are required to have at least two auditors carry out a joint statutory audit.¹⁰ Per ICAI’s SA 299¹¹ the joint auditors are required to divide work among themselves and coordinate the audit; if a single auditor takes up responsibility to audit the Ind AS 117 figures, that auditor may engage the Auditing Actuary.

IAI has proposed a different approach in its draft GN: Appendix A lays out an illustrative quadri-partite engagement letter whereby the insurance company engages the Auditing Actuary, and the engagement letter is also countersigned by the two joint auditors.

This approach may be operationally simpler where the Ind AS 117 components fall under the joint responsibility of the two statutory auditors. However, due care should be taken so that such an arrangement does not alter the substance of the Auditing Actuary’s role as an expert advisor to the auditors.

Can auditors continue to rely on the Appointed Actuary’s work?

Largely not. There are a few ideas to explore here, which are covered below.

The change described under “What has changed for insurance company audits in India?” means that auditors can no longer automatically rely on the Appointed Actuary (AA)‘s certification as audit evidence.

While the AA is a management’s expert under SA 500¹² and his work can be used accordingly, the following considerations flow from SA 500 and global best practice:

Firstly, a management’s expert’s work cannot automatically be used as audit evidence. As per para 8 of SA 500, the auditor needs to evaluate the expert’s competence, capabilities, and objectivity, obtain an understanding of the expert’s work, and evaluate the appropriateness of the expert’s work as audit evidence.

Secondly, since the AA is an employee of the company, it is difficult to treat him as objective under SA 500. The AA is required to be an employee of the insurance company (AFI Regulations¹ Schedule I part II para 2(1)(vi)). SA 500 para A42 states:

Because the threat to the objectivity created by being an employee of the entity will always be present, an expert employed by the entity cannot ordinarily be regarded as being more likely to be objective than other employees of the entity.

However, para A41 mentions that objectivity threats may be reduced by safeguards such as the management’s expert’s profession, legislation, or regulation. The fact that an AA is subject to all of these may be used to argue in favour of his objectivity. Conversely, the fact that he is an employee, his continuation and career growth in the company lie in the hands of the company’s management, his calculations impact the company’s stated financial position, and a significant proportion of his remuneration is generally in company ESOPs whose value depends on that stated financial position, may all be used to argue against his objectivity.

Thirdly, the AA may not have control over the calculation of all Ind AS 117 figures. As per Schedule I of the AFI Regulations,¹ his statutory responsibility is restricted largely to calculating undiscounted reserves, which may be used as an input for further Ind AS 117 calculations. Globally, in jurisdictions where the Appointed Actuary role exists, the IFRS 17 reporting responsibilities are generally not part of this role; in some jurisdictions, it is usual for insurance companies to outsource Appointed Actuary roles and IFRS 17 reporting roles to two separate actuarial firms. It is our view that such separation of concerns would benefit prudential governance in the Indian market as well.

Lastly, auditors globally do not rely on Appointed Actuaries’ work. As the audit is expected to provide an independent view of the financial statements, and IFRS 17 figures represent a significant portion of those financial statements, the auditor is generally expected to form an independent view of these figures.

Given this context, over time various stakeholders (IRDAI, SEBI, NFRA, insurance company Boards/Audit Committees, and institutional investors) may come to expect the involvement of Auditing Actuaries in audits of at least large or listed insurance companies.⁹

Can auditors rely on peer reviewers?

In general, no.

Peer review is an IAI requirement¹³¹⁴ for the AA’s annual valuation to be reviewed by an independent actuary. Its scope does not include the review of all Ind AS 117 figures.

As indicated in the responses to “To what extent can auditors rely on the auditing actuary’s work?” and “Can auditors continue to rely on the Appointed Actuary’s work?”, auditors remain responsible for their audit opinions and need to evaluate an auditor’s expert or management’s expert’s work before accepting it. As such, a favourable peer review report cannot be used automatically as audit evidence.

However, a possible area of efficiency is for the same actuary to be appointed as both the peer reviewer and the Auditing Actuary. The two roles do not conflict since both of them pertain to providing assurance on the work done. Further, having the same actuary take up both roles would reduce duplication of work since both the peer reviewer and the Auditing Actuary/auditor need to form a view on the adequacy of the actuarial liabilities.

At present, however, this is not permitted by the APS; as per APS 4 para 2.1 and APS 33 para 8.1.2, the peer reviewer cannot simultaneously carry out any other assignment for the insurance company. It is to be hoped that IAI makes an exception to permit peer reviewers to carry out Auditing Actuary assignments.

Abbreviations

• AA: Appointed Actuary
• AFI Regulations: IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 ¹
• APS: Actuarial Practice Standards issued by IAI
• CSM: Contractual Service Margin under IFRS 17 / Ind AS 117
• FAQ: Frequently asked questions
• GN: Guidance Note
• IAI: Institute of Actuaries of India
• IAS 19: International Accounting Standard on Employee Benefits
• ICAI: Institute of Chartered Accountants of India
• IFRS: International Financial Reporting Standards
• IFRS 2: IFRS on Share-Based Payments
• IFRS 17: IFRS on Insurance Contracts
• Ind AS: Indian Accounting Standards, India’s version of IFRS
• Ind AS 117: India’s version of IFRS 17
• ISA: International Standards on Auditing
• IRDAI: Insurance Regulatory and Development Authority of India
• NFRA: National Financial Reporting Authority
• OCI: Other comprehensive income / Statement of other comprehensive income
• PAA: Premium allocation approach under IFRS 17 / Ind AS 117
• P&L: Profit and loss / Statement of profit and loss
• SA: Standards on Auditing, the Indian versions of ISAs
• SEBI: Securities and Exchange Board of India

IFRS 17 / Ind AS 117 is among TailVaR’s areas of expertise. Contact us for any support or training needs.

Footnotes

1. IRDAI (Actuarial, Finance, and Investment Functions of Insurers). English text follows Hindi text. ↩ ↩² ↩³ ↩⁴

2. The AFI Regulation had predecessors with similar wordings. ↩

3. IRDAI (Actuarial, Finance, and Investment Functions of Insurers)(Amendment) Regulations, 2026. English text follows Hindi text. ↩

4. The corresponding Sch IIA part II para 1 has only 4 sub-paras. ↩

5. IRDAI’s circular dated 1 April 2026: Clarifications on implementation of Indian Accounting Standards (Ind AS). ↩ ↩²

6. The Indian financial year runs from April to March. ↩

7. SA 620, Using the work of an Auditor’s Expert (starts at page 12 of the PDF) ↩ ↩² ↩³ ↩⁴

8. IRDAI’s Master Circular on Corporate Governance for Insurers, 2024, Annexure 6 para III(2). (English text follows Hindi text). ↩

9. A direction from IRDAI requiring the involvement of Auditing Actuaries in audits of all insurance companies would be unsurprising in view of past regulatory developments. ↩ ↩² ↩³

10. IRDAI’s Master Circular on Corporate Governance for Insurers, 2024, Annexure 6 para III(1). (English text follows Hindi text). ↩

11. SA 299, Responsibility of Joint Auditors (starts at page 21 of the PDF) ↩

12. SA 500, Audit Evidence (starts at page 28 of the PDF) ↩

13. IAI’s APS4, Peer Review of Appointed Actuary’s work in Life Insurance ↩

14. IAI’s APS 33, Peer Review of Appointed Actuary’s work in General Insurance, Health Insurance, and Reinsurance ↩