Finance Ministry Clears 100% FDI in Insurance Sector

Finance Ministry notifies rules allowing 100% FDI in insurance sector

New Delhi: The Finance Ministry has notified amended rules permitting up to 100 per cent foreign direct investment in Indian insurance companies, formally aligning regulations with the higher investment cap approved by Parliament in December 2025.

The notification brings into force the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025, replacing the earlier framework that capped foreign investment at 74 per cent under the Insurance Act, 1938.

Regulatory alignment follows parliamentary approval

The move completes the legislative process that began last year, when the ministry issued a draft notification proposing to raise the foreign investment limit and invited public comments. The final rules reflect feedback received during that consultation phase and are intended to provide clarity and certainty to investors.

By formally notifying the amended rules, the government has removed regulatory inconsistencies between the Insurance Act and subordinate legislation, creating a single, harmonised framework for foreign participation in the sector.

Implications for insurers and investors

Officials said the change is expected to attract long-term foreign capital, strengthen balance sheets of domestic insurers and support deeper penetration of insurance products across the country. Higher foreign ownership is also expected to bring in global best practices, advanced risk management frameworks and improved governance standards.

The insurance sector has been identified as a key area for capital infusion as India seeks to expand coverage, improve claims settlement capacity and support innovation in life, health and general insurance.

Broader investment context

The notification comes amid a broader push to liberalise foreign investment norms across regulated sectors while maintaining oversight through sector-specific regulators. Policymakers have emphasised that easing ownership caps must go hand in hand with strong supervision to safeguard policyholders’ interests.

For international investors and financial services groups, such regulatory clarity plays a crucial role in evaluating regional investment strategies and jurisdictional choices. Policy stability in India, alongside alternative regional hubs, often shapes cross-border decisions, including considerations linked to business setup in dubai

The government has indicated that further operational guidelines, where required, will be issued by sector regulators to ensure smooth implementation of the revised investment framework.