Insurance News Details

100% FDI is permitted under automatic route in insurance sector, LIC capped at 20%

(02-May-26   18:56)

The central government on Saturday notified 100% Foreign Direct Investment (FDI) in the insurance sector through the 'Automatic Route'; this mechanism permits full foreign ownership. This move is expected to boost foreign participation within India's insurance sector.

Foreign investments in Indian insurance companies and intermediaries will henceforth be permitted up to 100% of their paid-up equity capital; this includes investments made by 'portfolio investors.'

Foreign investments in the Life Insurance Corporation of India (LIC) will continue to be governed under a distinct framework, for which the limit has been fixed at 20%. Meanwhile, the foreign investment limit for insurance intermediaries remains at 100%.

A press note issued by the Ministry of Finance stated that, 'The foreign investment up to one hundred per cent of the total paid-up equity of the Indian Insurance Company shall be allowed on the Automatic Route subject to approval and verification by the Insurance Regulatory and Development Authority of India.'

Although this full foreign ownership is permitted through the 'Automatic Route,' it will come into effect only after receiving the approval and verification of the Insurance Regulatory and Development Authority of India (IRDAI).

In that note, the Department for Promotion of Industry and Internal Trade (DPIIT) stated that foreign investment, including from portfolio investors, will now be allowed in domestic insurance companies under the automatic route. The new rules have been brought in line with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. The finance ministry had earlier said that most parts of the law, except Section 25, would come into effect from February 5.

The change comes after legislative approval of the Sabka Bima Sabki Raksha Bill, 2025, which was passed by Parliament in December 2025. The Bill paved the way for raising the FDI ceiling in insurance from 74% to 100% under the automatic route.

Subsequently, in February 2026, the Department for Promotion of Industry and Internal Trade (DPIIT)'operating under the Ministry of Commerce and Industry'issued a notification permitting 100 percent FDI in the insurance sector. The framework established through this notification has now been formalized by the Ministry of Finance.

The press note said The aggregate holdings by way of total foreign investment in the equity shares of an Indian Insurance Company by foreign investors, including portfolio investors, is permitted up to one hundred per cent. of the paid-up equity capital of such Indian Insurance company. However, these investment inflows are permitted subject to certain conditions:

Insurance companies involving Foreign Direct Investment (FDI) must ensure that at least one key management position'such as Chairperson, Managing Director, or Chief Executive Officer'is held by a resident Indian citizen.

Any change in foreign shareholding must comply with the pricing guidelines prescribed by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA).

Subject to IRDAI regulations, this 100% limit also extends to insurance intermediaries, including brokers, re-insurance brokers, corporate agents, third-party administrators, surveyors and loss assessors, general agents, and insurance repositories.

India had previously permitted full foreign ownership in insurance intermediaries in 2020, and subsequently allowed 20% FDI in the state-owned Life Insurance Corporation (LIC) in 2022.

Entities acting as insurance intermediaries'such as banks'shall continue to be governed by the foreign investment limits applicable to their primary sector, provided that their non-insurance revenue exceeds 50 percent of their total revenue in a financial year. Intermediaries with majority foreign ownership must be registered as limited companies as defined under the Companies Act, 2013.

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