The central government on Saturday announced 100% Foreign Direct Investment (FDI) in insurance companies under the automatic route, allowing full foreign ownership in the sector. This move is expected to significantly increase foreign participation in India's insurance industry. Foreign investment in Indian insurance companies and intermediaries will now be permitted up to 100% of the paid-up equity capital, including investments by portfolio investors.
Key Details of the Policy
In a press note, the Ministry of Finance stated, "The foreign investment up to one hundred per cent of the total paid-up equity of the Indian Insurance Company shall be allowed on the Automatic Route subject to approval and verification by the Insurance Regulatory and Development Authority of India." This full foreign ownership will be granted under the automatic route, but only after approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI).
Exceptions and Conditions
Life Insurance Corporation of India (LIC), however, will continue to follow a separate rule, with foreign investment limited to 20% under the automatic route, according to media reports. The Department for Promotion of Industry and Internal Trade (DPIIT) stated that foreign investment, including from portfolio investors, will now be allowed in domestic insurance companies under the automatic route. The new rules have been brought in line with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. The finance ministry had earlier said that most parts of the law, except Section 25, would come into effect from February 5.
Compliance and Governance
Insurance companies with foreign investment must ensure that at least one top role—chairperson, managing director, or chief executive officer—is held by a resident Indian citizen. Any change in foreign ownership will also need to follow pricing rules set by the Reserve Bank of India under FEMA regulations.
Scope and Intermediaries
The 100% FDI limit will also apply to insurance intermediaries such as brokers, reinsurance brokers, corporate agents, third-party administrators, surveyors and loss assessors, managing general agents, and insurance repositories, as per IRDAI rules. India had already allowed full foreign ownership in insurance intermediaries in 2020 and permitted 20% FDI in LIC in 2022.
Special Provisions for Banks
Banks working as insurance intermediaries will still follow foreign investment rules of their main sector, as long as their non-insurance income is more than 50% of total revenue in a financial year. Companies with majority foreign ownership in this space will need to be set up as limited companies under the Companies Act, 2013.
