Government Announces 100% FDI in Insurance Sector via Automatic Route

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. The move is expected to increase foreign participation in India’s insurance industry.

Foreign investment in Indian insurance companies and intermediaries will now be allowed up to 100% of the paid-up equity capital, including investments by portfolio investors. 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 permitted under the automatic route, but only after approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI). Life Insurance Corporation of India (LIC), however, will continue to follow a separate rule, with foreign investment limited to 20% under the automatic route.

In the note, 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.

The change comes after legislative approval of the Sabka Bima Sabki Raksha Bill, 2025, which was passed by Parliament in December 2025. The Bill paved the way for raising the FDI ceiling in insurance from 74% to 100% under the automatic route. After receiving the President’s assent, the Bill became law, completing the legislative process required for implementation. Subsequently, in February 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) under the Commerce and Industry Ministry issued a notification permitting 100% FDI in the insurance sector, setting the framework that has now been formalised by the Finance Ministry.

However, the inflows can be made under certain conditions: The press note said, "The aggregate holdings by way of total foreign investment in the equity shares of an Indian Insurance Company by foreign investors, including portfolio investors, is permitted up to one hundred per cent. of the paid-up equity capital of such Indian Insurance company."

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.

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. 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.