India Opens Insurance Sector to Full FDI

India’s central government has formally notified a significant policy change permitting up to 100 per cent Foreign Direct Investment (FDI) in domestic insurance companies under the automatic route. The move is intended to facilitate increased participation by foreign investors in the country’s insurance sector, according to agency reports cited by [a television news outlet].

Despite the broader liberalisation, the state-owned Life Insurance Corporation of India (LIC) will continue to operate under a separate regulatory framework. Foreign investment in LIC remains capped at 20 per cent under the automatic route, with no alteration to its existing limit.

The Department for Promotion of Industry and Internal Trade (DPIIT) issued the revised policy through Press Note 1 (2026 Series). It clarified that foreign investment—including portfolio investment—in Indian insurance companies will now be allowed automatically, subject to regulatory clearance and verification by the Insurance Regulatory and Development Authority of India (IRDAI).

This policy amendment aligns with the provisions of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. The Ministry of Finance had earlier notified that all sections of the Act, except Section 25, would come into force from 5 February. The updated FDI framework reflects these legislative changes.

Any increase in foreign shareholding must comply with pricing guidelines set by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA). These rules govern how shares are valued and transferred in transactions involving foreign investors.

The revised 100 per cent FDI limit also extends to insurance intermediaries. This includes brokers, reinsurance brokers, corporate agents, third-party administrators, surveyors and loss assessors, managing general agents, and insurance repositories. However, all such entities must adhere to regulatory norms prescribed by IRDAI.

India had previously introduced phased liberalisation in this sector. In 2020, full foreign ownership was permitted in insurance intermediaries. Subsequently, in 2022, the government allowed up to 20 per cent FDI in LIC, marking its partial opening to foreign investors.

Certain conditions remain applicable to specific entities. For instance, banks functioning as insurance intermediaries will continue to be governed by FDI limits relevant to their primary sector. This applies where non-insurance revenue accounts for more than 50 per cent of total revenue in a financial year. Additionally, intermediaries with majority foreign ownership are required to be incorporated as limited companies under the Companies Act, 2013.

The key features of the revised policy are summarised below:

This policy update represents a further step in the gradual liberalisation of India’s insurance sector, maintaining specific safeguards for state-owned entities while broadening access for foreign capital in the wider market.