Centre notifies 100% FDI in insurance sector under automatic route

In a significant move aimed at deepening capital inflows and boosting sectoral growth, the Centre on Saturday notified 100 per cent Foreign Direct Investment (FDI) in insurance companies under the automatic route, opening the door for greater participation by overseas investors.According to the notification, foreign investment in the insurance sector will be subject to compliance with the provisions of the Insurance Act, 1938. Companies receiving FDI will be required to obtain the necessary licence or approval from the Insurance Regulatory and Development Authority of India (IRDAI) to undertake insurance and related activities.
However, the government has carved out a separate framework for the Life Insurance Corporation of India (LIC), capping foreign investment at 20 per cent under the automatic route. Investment in LIC will remain governed by the provisions of the Life Insurance Corporation Act, 1956, along with applicable sections of the Insurance Act.The notification also mandates that at least one among the chairperson of the board, managing director, or chief executive officer of an Indian insurance company with foreign investment must be a resident Indian citizen, ensuring domestic oversight in key managerial positions.
In addition, the liberalised policy extends to insurance intermediaries, allowing 100 per cent foreign investment under the automatic route. These include insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third-party administrators, surveyors and loss assessors, managing general agents, and insurance repositories.
The move follows an earlier notification issued in February by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, which had outlined the framework for full FDI in the sector.The policy shift is aligned with broader legislative reforms, including the passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 by Parliament in December 2025. The amendments introduced key changes aimed at improving insurance penetration, enhancing competition, and strengthening regulatory oversight.Industry experts believe the decision could accelerate capital infusion, foster innovation, and expand insurance coverage across underserved segments, supporting the government's broader financial inclusion agenda.

(Business Correspondent)