Govt opens insurance sector: 100% FDI allowed via automatic route

The Centre has allowed 100% foreign direct investment (FDI) in insurance companies, marking a major liberalisation of India’s insurance sector. Under the revised policy, foreign investors can now own up to 100% stake in Indian insurance companies through the automatic route, significantly easing entry barriers and boosting capital inflows.

The Department for Promotion of Industry and Internal Trade (DPIIT), in Press Note 1 (2026 Series), clarified that foreign investment — including portfolio investments—will be permitted automatically, subject to regulatory clearance by the Insurance Regulatory and Development Authority of India (IRDAI). However, foreign investment in Life Insurance Corporation of India (LIC) will continue to remain capped at 20% under the automatic route, keeping the state-run insurer under a separate framework.

The policy change aligns with the Insurance Laws (Amendment) Act, 2025, aimed at improving insurance penetration and strengthening the sector’s capital base. Most provisions of the law came into force on February 5, 2026.

To ensure regulatory oversight and domestic control, insurance companies with foreign investment must appoint at least one resident Indian citizen as chairperson, managing director, or chief executive officer. Additionally, any increase in foreign shareholding must comply with pricing guidelines prescribed by the Reserve Bank of India under FEMA regulations.

The 100% FDI limit also extends to insurance intermediaries such as brokers, reinsurance brokers, corporate agents, third-party administrators, surveyors, loss assessors, managing general agents, and insurance repositories, subject to IRDAI norms. India had already permitted full foreign ownership in intermediaries in 2020.

Insurance intermediaries

Entities such as banks operating as insurance intermediaries will continue to follow foreign investment caps applicable to their primary sector, provided that more than 50% of their revenue comes from non-insurance activities. Further, majority foreign-owned intermediaries must be incorporated as limited companies under the Companies Act, 2013.

The move is expected to attract global insurers, improve competition, and accelerate insurance penetration across India, particularly in underserved segments.

Earlier this year, the Insurance Regulatory and Development Authority of India (IRDAI) has approved two new entrants and is progressing with the implementation of recent amendments to insurance laws.

At its 134th meeting held on March 9, the regulator granted certificates of registration to Allianz Jio Reinsurance Limited as a reinsurer and Kiwi General Insurance Limited as a general insurer. These approvals allow both entities to begin operations in India under the existing regulatory framework, expanding the pool of risk carriers in the market.