India's Union Cabinet has approved a Bill which contains a provision to increase the foreign direct investment limit in insurance companies to 100% from the present cap of 74%. The Bill, cleared on 12 December by the Cabinet, covers several other amendments.
The amendments to the Insurance Act 1938 are aimed at modernising insurance legislation and expected to unlock the full potential of the Indian insurance sector.
To qualify for 100% FDI, among an insurance company's chair, managing director or chief executive, one of them would have to be an Indian resident, a government source said.
An earlier proposal for a unified licence for insurance companies has, however, been dropped.
The Indian Insurance Laws (Amendment) Bill 2025 is now listed for approval in the ongoing winter session of Parliament. Incidentally, only four life insurers out of the 19 currently operating in India have tapped the existing 74% cap on FDI.
A unified composite licence would have allowed insurers to provide life, general and health insurance under a single entity. According to an official source, the government, however, felt that Indian insurance companies are not yet equipped to have a composite licence regime.
Deloitte India partner Debashish Banerjee, speaking with Asia Insurance Review, said, "While the intent to allow 100% FDI in insurance was indicated earlier this year, the present announcement is a positive step in translating that intent into action.
“Over the past few months, we have seen growing interest from several global insurers who are actively evaluating India as a long-term market, and greater clarity on ownership norms will help in moving those conversations forward.”
Mr Banerjee said, “For the industry, this is a constructive development. To enable the sector to scale fully, it will be important to see how the other reforms the government is contemplating come together, so that growth, governance and inclusion progress in parallel."