Lawmakers set to debate 100% FDI in insurance proposal

India’s proposal to permit 100% foreign direct investment (FDI) in insurance that figured in Budget FY26 announcements is set to be debated by lawmakers as the Bill mooting this and a clutch of a few other amendments to key insurance laws was circulated to Members of the Parliament on Monday.

The aggregate holdings of equity shares by foreign investors, including portfolio investors, in an Indian insurance company may extend up to 100% of the paid-up equity capital. The investment will be subject to “such conditions and such manner as may be prescribed,” per the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, seeking to raise the FDI limit from 74%.

The move is aimed at accelerating the growth in the insurance sector, according to the Bill to amend the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the Insurance Regulatory and Development Authority Act, 1999. Coming in the backdrop of the Insurance for All by 2047 goal of the government, the Bill was approved by the Union Cabinet last week.

Some of the other amendments proposed include reducing net-owned fund requirements for foreign re-insurers to Rs.1,000 crore as a step to encourage more foreign re-insurers to open branches in India; those requiring insurers to maintain complete record of policies issued by them and ensuring confidentiality of the information; and setting up a Policyholders’ Education and Protection Fund by insurance regulator IRDAI.

While the proposal to enable 100% FDI was hailed by industry leaders, it did not go down well with the All India Insurance Employees’ Association, which said allowing total freedom and greater access to foreign capital would retard the orderly growth of the insurance industry. There will be enhanced focus on profits and have disastrous impact of the interests of the marginalised sections of the society.

Lowering of the net-owned fund requirements for foreign re-insurers, from Rs.5,000 crore, and some of the other amendments proposed would take the country to the pre-1956 situation which compelled the government to nationalise the life insurance business.

Finance Minister Nirmala Sitharaman, in the Bill, said besides accelerating growth and development of the insurance sector, the amendments are aimed at ensuring better protection of policyholders; improve ease of doing business; and bring transparency in regulation making and to improve regulatory oversight over the sector.