In a major policy update, the finance ministry has officially allowed up to 100% foreign direct investment (FDI) in insurance companies through the automatic route.
The move comes under the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026, notified on Saturday. However, the notification clarified that foreign investment in Life Insurance Corporation will remain capped at 20%.
“Foreign investment in this sector shall be subject to compliance with the provisions of the Insurance Act, 1938(4 of 1938), and the condition that companies receiving FDI shall obtain necessary licence or approval from the Insurance Regulatory and Development Authority of India to undertake insurance and related activities,” the notification stated.
The rules also mention that any increase in foreign investment in Indian insurance companies must follow the prescribed pricing guidelines.
Earlier in February, the government operationalised 100% foreign ownership in the insurance sector. The Department for Promotion of Industry and Internal Trade issued Press Note 1 (2026 Series), allowing foreign investment, including participation by portfolio investors in domestic insurance firms. This policy change aligns with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025.
The finance ministry had earlier stated that most provisions of the law, except Section 25, came into effect from February 5.
As per the updated norms, insurance companies receiving FDI must have at least 1 resident Indian citizen serving as chairperson, managing director, or chief executive officer.
The 100% FDI limit will also apply to insurance intermediaries such as brokers, reinsurance brokers, corporate agents, third-party administrators, surveyors and loss assessors, managing general agents, and insurance repositories, subject to regulatory norms.
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