Insurance Laws (Amendment) Bill: Centre to bring in 100% FDI, composite licences in biggest sector overhaul in years
FM Nirmala Sitharaman on February 1 announced raising FDI in insurance from 74% to 100%, opening the door to global insurers and larger foreign capital flows. The move—requiring amendments to key insurance laws—will be placed before Parliament soon to drive greater competition and efficiency.
- Dec 2, 2025,
- Updated Dec 2, 2025 12:30 PM IST
The Centre’s plan to introduce the Insurance Laws (Amendment) Bill, 2025, in the sixth session of the 18th Lok Sabha marks the most sweeping overhaul of India’s insurance framework in more than a decade. The proposed legislation—expected to pass in Parliament, according to industry executives—seeks to unlock large-scale capital inflows, modernise distribution, and accelerate penetration in a market where coverage remains significantly below global averages.
100% FDI
Momentum behind the reforms intensified after Finance Minister Nirmala Sitharaman’s February 1 announcement raising the foreign direct investment (FDI) cap in insurance from 74% to 100%. Amending the Insurance Act, 1938, the LIC Act, 1956, and the IRDA Act, 1999 is essential to implement this shift.
The higher FDI ceiling is expected to draw major global insurers—nearly 20 of the world’s top 25 have no Indian presence today—and allow foreign partners in existing joint ventures to acquire Indian stakes and establish wholly owned entities. With India’s insurance penetration at 3.7% in 2023–24 versus the global average of 7%, the sector is widely considered undercapitalised.
International participation is expected to bring advanced underwriting tools, digital claims systems, and global best practices that can push domestic firms to innovate, expand reach, and improve customer experience.
Key reforms
Trinath Tadakamalla, Partner at Solaris Legal, said the Bill represents “an extensive review of the Indian insurance framework in over a decade,” aligned with the long-term goal of “Insurance for All by 2047.”
Key reforms he outlined include:
Full foreign ownership, with regulatory safeguards.
Composite licensing to unify life, health and general insurance under one licence.
Lower capital and solvency norms, allowing IRDAI to reduce minimum capital to as low as ₹50 crore for select segments.
Perpetual licences for intermediaries.
Greater flexibility for agents to represent multiple insurers.
Governance changes including relaxed board composition norms and clearer rules for foreign dividends.
Existing JVs may undergo restructuring as global firms consider buyouts or new partnerships.
Composite Licences to Break Product Silos
Among the most significant proposals is the introduction of composite licences, which would allow insurers to operate across multiple business lines under a single regulatory umbrella. Today, life insurers cannot sell general insurance, and vice versa.
Composite licences are aimed at:
Reducing duplicate compliance and operating costs
Enabling bundled products that integrate life, health and property coverage
Improving cross-selling and unified risk pricing
Simplifying supervision for IRDAI
The move mirrors mature global markets and is expected to make India’s regulatory landscape more efficient.
New and digital-first entrants
The Bill proposes reduced capital thresholds and differential capital norms based on business class and scale. For new or specialised insurers serving underserved regions, IRDAI may allow minimum capital of around ₹50 crore.
For foreign reinsurers, the net-owned fund requirement may drop from ₹5,000 crore to about ₹1,000 crore—removing a long-standing entry barrier. These measures are expected to attract digital-first carriers, microinsurance players, and new-age reinsurers, widening product availability and enhancing risk capacity.
Ease of doing business
Intermediaries such as brokers and corporate agents have long sought perpetual licences, arguing that frequent renewals impose heavy compliance and administrative costs. Under the Bill, one-time registration would replace the current three-year renewal cycle.
Tadakamalla said perpetual licences provide stability, enable long-term investment in digital platforms, and align India with global regulatory practice. Continuous supervision through reporting and fit-and-proper checks would replace the need for periodic renewals.
Agent flexibility and distribution
The government is also expected to permit individual agents to sell products from multiple insurers, a major shift from the existing restriction limiting them to one general and one life insurer. The change is poised to expand distribution reach, broaden customer choice, and intensify competition.
With far-reaching reforms spanning ownership, capital norms, licensing, governance, and distribution, the Insurance Laws (Amendment) Bill, 2025 is poised to reshape India’s insurance landscape and accelerate its evolution into a more competitive, globally integrated, customer-centric industry.
The Centre’s plan to introduce the Insurance Laws (Amendment) Bill, 2025, in the sixth session of the 18th Lok Sabha marks the most sweeping overhaul of India’s insurance framework in more than a decade. The proposed legislation—expected to pass in Parliament, according to industry executives—seeks to unlock large-scale capital inflows, modernise distribution, and accelerate penetration in a market where coverage remains significantly below global averages.
100% FDI
Momentum behind the reforms intensified after Finance Minister Nirmala Sitharaman’s February 1 announcement raising the foreign direct investment (FDI) cap in insurance from 74% to 100%. Amending the Insurance Act, 1938, the LIC Act, 1956, and the IRDA Act, 1999 is essential to implement this shift.
The higher FDI ceiling is expected to draw major global insurers—nearly 20 of the world’s top 25 have no Indian presence today—and allow foreign partners in existing joint ventures to acquire Indian stakes and establish wholly owned entities. With India’s insurance penetration at 3.7% in 2023–24 versus the global average of 7%, the sector is widely considered undercapitalised.
International participation is expected to bring advanced underwriting tools, digital claims systems, and global best practices that can push domestic firms to innovate, expand reach, and improve customer experience.
Key reforms
Trinath Tadakamalla, Partner at Solaris Legal, said the Bill represents “an extensive review of the Indian insurance framework in over a decade,” aligned with the long-term goal of “Insurance for All by 2047.”
Key reforms he outlined include:
Full foreign ownership, with regulatory safeguards.
Composite licensing to unify life, health and general insurance under one licence.
Lower capital and solvency norms, allowing IRDAI to reduce minimum capital to as low as ₹50 crore for select segments.
Perpetual licences for intermediaries.
Greater flexibility for agents to represent multiple insurers.
Governance changes including relaxed board composition norms and clearer rules for foreign dividends.
Existing JVs may undergo restructuring as global firms consider buyouts or new partnerships.
Composite Licences to Break Product Silos
Among the most significant proposals is the introduction of composite licences, which would allow insurers to operate across multiple business lines under a single regulatory umbrella. Today, life insurers cannot sell general insurance, and vice versa.
Composite licences are aimed at:
Reducing duplicate compliance and operating costs
Enabling bundled products that integrate life, health and property coverage
Improving cross-selling and unified risk pricing
Simplifying supervision for IRDAI
The move mirrors mature global markets and is expected to make India’s regulatory landscape more efficient.
New and digital-first entrants
The Bill proposes reduced capital thresholds and differential capital norms based on business class and scale. For new or specialised insurers serving underserved regions, IRDAI may allow minimum capital of around ₹50 crore.
For foreign reinsurers, the net-owned fund requirement may drop from ₹5,000 crore to about ₹1,000 crore—removing a long-standing entry barrier. These measures are expected to attract digital-first carriers, microinsurance players, and new-age reinsurers, widening product availability and enhancing risk capacity.
Ease of doing business
Intermediaries such as brokers and corporate agents have long sought perpetual licences, arguing that frequent renewals impose heavy compliance and administrative costs. Under the Bill, one-time registration would replace the current three-year renewal cycle.
Tadakamalla said perpetual licences provide stability, enable long-term investment in digital platforms, and align India with global regulatory practice. Continuous supervision through reporting and fit-and-proper checks would replace the need for periodic renewals.
Agent flexibility and distribution
The government is also expected to permit individual agents to sell products from multiple insurers, a major shift from the existing restriction limiting them to one general and one life insurer. The change is poised to expand distribution reach, broaden customer choice, and intensify competition.
With far-reaching reforms spanning ownership, capital norms, licensing, governance, and distribution, the Insurance Laws (Amendment) Bill, 2025 is poised to reshape India’s insurance landscape and accelerate its evolution into a more competitive, globally integrated, customer-centric industry.