The central government on Saturday announced 100% FDI in insurance companies under the automatic route, allowing full foreign ownership in the sector.
The move is expected to increase foreign participation in the insurance industry in India. Foreign investment in Indian insurance companies and brokers will now be allowed up to 100% of the paid-up capital, including investments by portfolio investors.“Foreign investment up to one hundred per cent of the total equity paid to an Indian insurance company should be allowed on the automatic route subject to approval and verification by the Insurance Regulatory and Development Authority of India,” the Finance Ministry said in a press note.This full foreign ownership will be allowed under the automatic route, but only after approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI).However, the Life Insurance Corporation of India (LIC) will continue to follow a separate rule, where foreign investment is limited to 20% under the automatic route, according to media reports.In the memorandum, the Department for Promotion of Industry and Internal Trade (DPIIT) said foreign investment, including from portfolio investors, in local insurance companies will now be allowed under the automatic route.
The new rules have been brought in line with the Sabka Bhima Sabki Raksha (Amendment in Insurance Laws) Act, 2025. The Finance Ministry had earlier said that most parts of the law, except Section 25, will come into force from February 5.This change comes after the legislative approval of the Sabka Bhima Sabki Raksha Bill, 2025, which was passed by Parliament in December 2025. The bill paved the way for raising the ceiling on foreign direct investment in insurance from 74% to 100% under the automatic route.After receiving the President’s approval, the bill became law, completing the necessary legislative process for implementation.Subsequently, in February 2026, the Department for the Promotion of Industry and Internal Trade under the Ministry of Trade and Industry issued a notification allowing 100% foreign direct investment in the insurance sector, setting out the framework that has now been formalized by the Ministry of Finance.However, inflows can be made under certain conditions: “Total holdings by aggregate foreign investment in shares of an Indian insurance company by foreign investors, including portfolio investors, are permitted up to one hundred percent of the paid-up share capital of such Indian insurance company,” the press note said.Foreign-invested insurance companies must ensure that at least one chairman, managing director or chief executive officer is occupied by a resident Indian national.Any change in foreign ownership will also need to follow pricing rules set by the Reserve Bank of India under Federal Emergency Management Agency (FEMA) regulations.The 100% FDI limit will also apply to insurance intermediaries such as brokers, reinsurance brokers, corporate agents, third-party managers, surveyors, loss assessors, managing general agents and insurance warehouses, according to IRDAI rules.India has already allowed full foreign ownership in insurance brokers in 2020 and allowed 20% FDI in LIC in 2022.Banks that act as insurance intermediaries will continue to follow foreign investment rules in their main sector, as long as their non-insurance income exceeds 50% of total revenues in the financial year. Companies with majority foreign ownership in this area will need to be established as limited companies under the Companies Act 2013.
