It’s a sea of red across the market. Most of the sectors are struggling in trade amid the ongoing US-Iran conflict and rising global uncertainty. However, one pocket of the market has quietly caught the attention of global brokerage firm Jefferies – general insurance.
The time when volatility is shaking equities and investors are turning cautious, the brokerage house has identified Star Health and ICICI Lombard General Insurance as its preferred picks in the space. The factors driving the optimism is not a sudden jump in premiums or a surge in claims. Instead, it is a major accounting shift proposed by the insurance regulator.
Let’s take a look at the detailed investment rationale offered by the brokerage house. –
Shift to Ind AS could lift reported profits
According to the brokerage report, the Insurance Regulatory and Development Authority of India (IRDAI) on 3 March 2026 “proposed transition to Ind AS (IFRS) from 1 April 2026.”
Ind AS, or Indian Accounting Standards aligned with International Financial Reporting Standards (IFRS), will replace the existing Indian Generally Accepted Accounting Principles (IGAAP) for insurers.
This transition could materially change how profits are reported. As per the brokerage report, “Ind AS reconciliations suggest profits can rise 25-30% for mature general insurers primarily due to deferral of acquisition costs.”
Under the new framework, acquisition costs such as commissions will be amortised over time instead of being fully expensed upfront. In addition, equity mark-to-market gains and losses will flow through the profit and loss statement, and insurance liabilities can be discounted.
The brokerage noted, “While Ind AS is an accounting change, not impacting cash flows, higher accounting profits could drive valuations.”
Low probability of implementation delays
Regulatory transitions are often delayed, but this time preparedness appears stronger. According to the brokerage report, “Likelihood of delays may be low as most insurers have submitted gap studies and FY24/25 Ind AS financials.”
The report further indicates that insurers have already submitted pro forma financial statements and undertaken corrective steps to address compliance gaps. This reduces uncertainty around the timeline. Although the regulator may consider a phased rollout, the proposed 1 April 2026 implementation appears realistic.
Strong earnings growth visibility under IFRS
Beyond the accounting transition, Jefferies also highlighted growth prospects. According to the brokerage report, “Star Health and ICICI General Insurance remain our top picks in the general insurance sector.”
It added that “Both companies offer 16-21% IFRS operating profit growth over FY26-28e while trading at 18-25x FY27e EPS.”
Conclusion
The brokerage’s bullish stance rests on three pillars – a regulatory driven accounting shift that could lift reported profits by 25-30%, low likelihood of implementation delays, and projected double-digit operating profit growth over the next few years.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.