India considers raising insurance FDI cap to 100%

Despite many industries open to FDI, the insurance sector remains partially restricted.

India’s officials are considering a proposal to increase the foreign direct investment (FDI) limit in the insurance sector from the current 74% to 100%, reported the Times of India.

The move, supported by the Insurance Regulatory and Development Authority of India (IRDAI), will require political approval as it involves amending the Insurance Act. In addition to raising the FDI cap, other proposals to ease FDI rules—such as removing the mandate for Indians in certain top management positions—are under review.

A comprehensive set of amendments to the insurance law is also being proposed, although the timing for introducing the bill remains undecided. 

The Department for Promotion of Industry and Internal Trade is reviewing sectoral norms and rules to facilitate unrestrained investment. Whilst many consumer-facing sectors in India have fully opened up to FDI, insurance remains partially restricted.

Officials noted that most large Indian companies have already invested in the insurance sector, and allowing 100% FDI could attract foreign players with substantial financial resources who are currently unable to find suitable domestic partners. 

This change would be particularly advantageous for the long-gestation life insurance business, which requires significant and ongoing capital to meet regulatory solvency norms before turning profitable.

A senior finance ministry official confirmed that discussions with IRDAI on the proposed amendments are ongoing and expected to be finalised soon. However, given that the BJP does not hold a majority in the Lok Sabha, the political leadership will have the final say, though NDA partners are unlikely to oppose the plan.