The Centre has allowed up to 100% foreign direct investment (FDI) in insurance companies under the automatic route, weeks after clearing the proposal at the Cabinet level.
As per a government notification, the changes have been operationalised under the Insurance Laws (Amendment) Act, 2025.
The amendment was cleared in December 2025, raising the FDI cap from 74% to 100% as part of a broader sector overhaul.
The government said that the measure is expected to attract stable long-term investment, facilitate technology transfer, support greater insurance penetration and social protection.
Under the new rules, foreign investment in insurance companies would not require prior government approval, but will remain subject to regulatory clearance from the Insurance Regulatory and Development Authority of India (IRDI).
However, foreign investment in the Life Insurance Corporation of India (LIC) remains capped at 20% under the automatic route.
The government has built in conditions alongside the higher limit. Insurance companies with foreign investment must appoint at least one resident Indian citizen as chairperson, managing director or CEO. Any increase in foreign shareholding must also comply with pricing norms set by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA).
The 100% FDI limit will also extend to insurance intermediaries, including brokers, third-party administrators and surveyors, in line with existing norms. India had already opened up intermediaries to full foreign ownership in 2020.
Alongside raising the cap, the amendment law includes broader structural changes. These include updates to the Insurance Act, 1938, lower paid-up capital requirements and the introduction of a composite licence framework. Amendments to the LIC Act, 1956 and the IRDAI Act, 1999 are also part of the package, aimed at giving insurers more operational flexibility.
The timing is significant. India’s insurance market is projected by IRDAI to become the sixth largest globally within the next decade. At the same time, the insurtech segment is emerging as a large opportunity, driven by digital distribution and underwriting.
For startups and domestic insurers, the change cuts both ways. More foreign capital and global players could speed up product innovation and digital adoption. But it also raises competition, especially if global insurers enter with stronger balance sheets and technology-led models.
The policy shift was first announced by finance minister Nirmala Sitharaman in the Union Budget for 2026.
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