The proposed raising of Foreign Direct Investment (FDI) limit in Indian insurance companies to 100% would bring more players into the market and generate employment opportunities according to Indian finance minister Ms Nirmala Sitharaman.
According to a press report by news agency PTI, Ms Sitharaman informed the Indian parliament that "Improved technologies and automation would lead to faster underwriting, claim processing leading to improved turnaround time thereby reducing cost and enhancing overall efficiency of the sector." Finance minister was replying to a member’s query in Rajya Sabha on 12 August 2025. Rajya Sabha is the upper house of the Indian parliament.
The proposal to increase the FDI in Indian insurance companies from 74% to 100% was announced by Ms Sitharaman while presenting India’s federal budget for the financial year 2025-26 to the parliament on 1 February 2025.
The implementation of the budget proposals, however, requires amending the Indian Insurance Act, 1938 which governs investment by insurers with a strong emphasis on safety, liquidity, and regulatory oversight by aligning investment by insurers with policyholder interests
The Act also stipulates time, manner, form, conditions and instruments allowed for investment. Insurers are mandated to invest a specified percentage of funds in government securities and other approved securities as specified by Insurance Regulatory and Development Authority of India (IRDAI).
"Additionally, the Act does not permit Indian insurance companies to invest any of their funds outside India. Hence, all the funds of insurance companies must be compulsorily invested in India."
The minister said to ensure financial stability in the insurance sector and protection of policyholders, the Act further mandates every insurer to maintain at all times, an excess of assets over liabilities of not less than 50% of the minimum capital amount. IRDAI further mandates insurers to maintain the control level of solvency of 150% at all times, she said.
Further, in case of an insurer acting in a manner prejudicial to the policyholders’ interests, the regulator is empowered by the Act to supersede the Board of such insurance company and appoint an Administrator to manage the affairs of the insurance company.
Besides, she said, the regulatory oversight of the IRDAI ensures transparency and policyholder protection by promoting fair business practices, solvency monitoring, supervision and efficient grievance redressal.
As per the Companies Act, 2013, all insurance companies are board- governed entities and are required to be compliant with the Companies Act, 2013 at all times for all governance matters.