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- The Indian insurance sector has reached a historic milestone. Following the notification of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, the Department for Promotionof Industry and Internal Trade (‘DPIIT’) has operationalized 100% Foreign Direct Investment (‘FDI’) in insurance companies under the automatic route through Press Note No.1 of 2026 dated 9 February2026
BACKGROUND
- FDI in the insurance sector was first permitted in 2000.Thereafter, the limits and conditions relating thereto have been further liberalized over the years.
- The previous major reformcame through Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021 w.e.f. 19 August 2021where by ceiling on FDI in Indian insurance companies was increased from 49% to 74% under the automatic route.
- On 3 February 2026, the Government of India notified the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025,amending the following key legislations relating to the Insurance Sector:
- The Insurance Act, 1938 (‘Insurance Act’)
- The Life Insurance CorporationAct, 1956;and
- The Insurance Regulatory and Development Authority Act, 1999
- As a part of thesea mendments, the FDI ceiling in Indian insurance companies has been increased from 74% to 100% under the automatic route.
- In line with these amendments, Press Note No. 1 of 2026 dated 9 February 2026 issued by the DPII Tupdated the Consolidated FDI Policy to reflect these changes.
- Key changes at a glance:
Sector Earlier FDI Limit Revised FDI Limit Entry Route Insurance Company 74% 100% Automatic Life Insurance Corporation of India 20% 20% Automatic Insurance Intermediaries 100% 100% Automatic - Relaxation in governance norms:
- Earlier : In an Indian Insurance company having foreign investment, the majority of its (i) directors, (ii) KMPs (Key Manageria lPersonnel) and (iii) at least one among the Chairperson of the Board,Managing Director and CEO had to be resident Indian citizens.
- After the amendment: Under the new policy, this has been relaxed and it issufficient if at least one among the Chair person of the Board,Managing Director, and CEO is a resident Indian citizen.
- Over the years, India’s insurance sector has undergone significant and progressive regulatory reforms aimed at strengthening the industry.
- The recent increase in the FDI cap for insurance companies from 74% to 100% under the automatic route marks a transformative shift in the regulatory landscape and is expected to substantially boost foreign capital in flows into the sector.
- The amendment is likely to attract greater participation from global insurers, facilitating capital augmentation, adoptionof advanced technologies, and integrationof international best practices. Increased competition is also expected to drive operational efficiency, innovation in products and services, andimproved consumer outcomes.
- Overall, this reform represents a decisive step toward deepening India’s insurance market and aligning it with global investment and governance standards.
- Although the Press Note allows for an increased FDI limit effective 5 February 2026, the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 havenotyet been updated to incorporate these higher thresholds.
- Accordingly, amendment to Schedule I of the NDI Rules will be required to align the sectoral cap, entry route, and accompanying conditions with the updated regulatory landscape for the Indian insurance sector.
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