Review of Foreign Direct Investment (FDI) Policy on Insurance Sector: Key Amendments and Implications

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Dated: 12.02.2026

Review of Foreign Direct Investment (FDI) Policy on Insurance Sector: Key Amendments and Implications

The Government of India has recently announced significant amendments to the Foreign Direct Investment (FDI) policy in the insurance sector, as outlined in Press Note No. 1 (2026 Series) issued by the Department for Promotion of Industry and Internal Trade (DPIIT). These changes aim to enhance foreign investment opportunities, streamline regulations, and foster growth in the insurance industry. Below, we provide a detailed overview of the revised policy and its implications.

Key Amendments to the FDI Policy on Insurance Sector 

1. Revised FDI Limits

The FDI policy has been updated to allow increased foreign equity participation in the insurance sector. The new limits are as follows:

Insurance Companies: Foreign investment is now permitted up to 100% of equity under the Automatic Route.
Life Insurance Corporation of India (LIC): Foreign investment is capped at 20% of equity under the Automatic Route.
Insurance Intermediaries: Entities such as insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third-party administrators, surveyors, loss assessors, managing general agents, and insurance repositories can now receive 100% foreign equity investment under the Automatic Route.

2. Other Conditions for Indian Insurance Companies and Intermediaries 

The amendments also introduce specific conditions for Indian insurance companies and intermediaries to ensure compliance with regulatory frameworks and safeguard national interests:

Aggregate Foreign Investment: Total foreign investment in the equity shares of an Indian insurance company is permitted up to 100% of the paid-up equity capital, including portfolio investments.
Approval and Verification: Foreign investment up to 100% is allowed under the Automatic Route, subject to approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI).
Compliance with Insurance Act, 1938: Companies receiving FDI must comply with the provisions of the Insurance Act, 1938, as amended, and obtain necessary licenses/approvals from IRDAI.
Key Management Positions: In Indian insurance companies with foreign investment, at least one of the Chairperson, Managing Director, or Chief Executive Officer must be a Resident Indian Citizen.
Pricing Guidelines: Any increase in foreign investment must adhere to the pricing guidelines specified by the Reserve Bank of India (RBI) under FEMA regulations.

3. Specific Provisions for Insurance Intermediaries 

Insurance intermediaries with majority foreign shareholding must meet additional requirements:

Incorporate as a limited company under the Companies Act, 2013.
Ensure that at least one key management position (Chairman, CEO, Principal Officer, or Managing Director) is held by a Resident Indian Citizen.
Bring in advanced technological, managerial, and other skills to enhance the sector.
Disclose all payments made to group, promoter, subsidiary, interconnected, or associate entities in formats specified by IRDAI.

4. Provisions for Life Insurance Corporation of India (LIC) 

Foreign investment in LIC is subject to compliance with the Life Insurance Corporation Act, 1956, as amended. Additionally, the terms and conditions applicable to Indian insurance companies under Section 43 of the LIC Act will also apply to LIC.

Implications of the Revised FDI Policy

The amendments to the FDI policy in the insurance sector are expected to have far-reaching implications:

Boost to Foreign Investment: The increase in FDI limits for insurance companies and intermediaries will attract more foreign capital, fostering growth and innovation in the sector.
Enhanced Global Collaboration: By allowing 100% foreign equity in insurance intermediaries, the policy encourages global players to bring advanced technologies and expertise to India, improving service quality and efficiency.
Strengthened Regulatory Oversight: The requirement for compliance with the Insurance Act, 1938, LIC Act, and IRDAI regulations ensures that foreign investments align with national interests and maintain the integrity of the insurance sector.
Opportunities for LIC: The decision to allow 20% foreign investment in LIC under the Automatic Route opens new avenues for the corporation to access foreign capital, which can be utilized for expansion and modernization.
Economic Growth: The liberalization of FDI norms in the insurance sector is expected to contribute to the overall economic growth by creating jobs, increasing insurance penetration, and enhancing financial inclusion.

Conclusion

The Government of India’s review of the FDI policy in the insurance sector is a progressive step towards attracting foreign investment and strengthening the industry. By increasing FDI limits and introducing robust regulatory measures, the policy aims to create a conducive environment for growth, innovation, and global collaboration. These changes are expected to benefit not only the insurance companies and intermediaries but also the Indian economy as a whole.

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Source: DPIIT

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