Govt’s insurance reform allows 100% FDI, composite licences

The government has paved the way for 100% foreign direct investment in the insurance sector, composite licences and easier capital requirements, among others sweeping reforms, as the Union cabinet cleared the enabling legislation, said two officials aware of the matter.

- Subhash Narayan

The Insurance Laws (Amendment) Bill is expected to be introduced in both houses of Parliament next week, the first of the two officials quoted above said.

The bill also allows a differential licensing to support micro-insurers serving low-income and rural populations and paves the way for captive insurers—allowing conglomerates to establish in-house insurers to manage group-level risks, according to both the people quoted earlier, who spoke on the condition of anonymity.

India currently caps FDI in insurance at 74%. No FDI cap on and easier rules are aimed at driving investments, as India has among the lowest insurance penetration among large global economies. According to the Insurance Regulatory and Development Authority's FY24 annual report, India’s insurance penetration fell to 3.7% from 4% in FY23 against a global average of 7%.

“The government’s move to permit 100% FDI in insurance represents a transformative step for India’s risk and protection landscape. It opens the door to greater foreign capital, global best practices and advanced capabilities, which will in turn lead to deeper insurance penetration, product innovation, and stronger underwriting capacity - all critical for an economy as dynamic as India’s,” said Sanjay Kedia, chief executive at Marsh McLennan India and president and chief executive officer (CEO), Marsh India.