100 pc FDI, reinsurance relief to strengthen India’s insurance sector

New Delhi, Jan 7 (IANS) India’s insurance sector is poised to benefit significantly after Parliament cleared the Insurance Laws (Amendment) Bill, 2025, a move that allows 100 per cent foreign direct investment and eases entry norms for global reinsurers.

The reforms are expected to improve access to capital, support solvency requirements, boost competition and strengthen the overall insurance ecosystem, especially for smaller and mid-sized insurers, as per Insurance Asia report.

The bill raises the foreign direct investment limit in insurance companies to 100 per cent from the earlier cap of 74 per cent.

To enable this, amendments have been made to key laws governing the sector, including the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the IRDAI Act, 1999.

The higher FDI limit is expected to ease capital constraints for insurers at a time when solvency requirements are becoming more stringent.

According to CareEdge Ratings, the reform could also support consolidation in the insurance industry.

Another important provision in the bill lowers the net-owned fund requirement for foreign reinsurers to Rs 1,000 crore from the earlier Rs 5,000 crore.

This reduction significantly lowers entry barriers for international and specialised reinsurance players.

CareEdge Ratings said the move could increase competition and expand reinsurance capacity in the domestic market, while ensuring that the required capital remains within India to support local insurers.

Meanwhile, a report by Emkay Global Financial Services also said that India’s insurance sector is expected to deliver a satisfactory operating performance in Q3 FY26.

While premium growth momentum is likely to strengthen, profitability metrics are expected to remain under pressure amid GST input tax credit (ITC) losses, elevated commission payouts and regulatory adjustments, it said on Tuesday.

Last month, the industry body hailed it by saying “brings clarity, confidence and long term capital into a growing sector that plays a central role in strengthening financial security”.

The bill also introduces greater regulatory flexibility for insurers operating in Special Economic Zones and International Financial Services Centres within SEZs.

This gives the central government the power to frame customised insurance regulations for these zones, which is expected to promote cross-border insurance activity and strengthen IFSCs as regional insurance hubs.

–IANS

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