Source: BL
Context:
The Government has listed the Insurance Laws (Amendment) Bill, 2025 for the Winter Session of Parliament. The bill aims to accelerate growth, deepen insurance penetration, improve ease of doing business, and fulfill the FY26 Budget announcement of raising FDI limit in insurance from 74% to 100%.
Key Provisions of the Bill
- FDI Enhancement
- FDI limit increased to 100% for companies investing the entire premium in India.
- Conditionalities and guardrails for foreign investment will be reviewed and simplified.
- Expected to attract stable foreign investment, enhance competition, facilitate technology transfer, and improve insurance penetration.
- Composite Licensing
- Insurers can obtain a single licence to operate in multiple segments: life, health, and general insurance.
- Promotes operational flexibility, innovation, and regulatory simplification.
- Capital & Regulatory Adjustments
- Lower entry capital allowed for under-served segments (not less than ₹50 crore).
- Net Owned Funds for foreign reinsurers reduced from ₹5,000 crore to ₹1,000 crore.
- Conditions on Key Management Persons, Board composition, and dividend repatriation to be reviewed to facilitate foreign participation.
- Insurance Penetration & Development Goals
- Supports the government’s “Insurance for All by 2047” vision.
- Enhances accessibility, affordability, and availability of insurance products nationwide.
- Anticipated to improve insurance density, reduce protection gaps, and enhance service quality.
Rationale
- Indian insurance sector projected to grow 7.1% annually over next 5 years, outpacing global growth.
- Aligns India with global practices: countries like Canada, Brazil, Australia, and China permit 100% FDI in insurance.
- Greater foreign participation expected to:
- Increase competition
- Improve product offerings
- Boost technology adoption and knowledge transfer
- Strengthen the overall financial sector ecosystem
