FDI in the Insurance Sector
Foreign investors can now own up to 100% of an Indian insurer. Here is how the limit got there.
Foreign investors can now own up to 100 per cent of an Indian insurance company. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 inserted a new section 3AA in the Insurance Act, 1938 allowing foreign holdings, portfolio investors included, of up to 100 per cent of paid-up equity, subject to conditions the government prescribes. The Act came into force on 5 February 2026 (Gazette notification S.O. 490(E)).
Before that the cap was 74 per cent. India got there in four steps over 25 years, and IC-26 questions on the Management Environment chapter like to test which figure belongs to which year.
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FDI Limit in Insurance: Timeline
August 2000
Limit for insurance companies
26%
How
Sector opened to private and foreign players after the IRDA Act, 1999
2015
Limit for insurance companies
49%
How
Insurance Laws (Amendment) Act, 2015
2021
Limit for insurance companies
74%
How
Finance Act, 2021; IRDAI then amended its Indian insurance company regulations (notified 7 July 2021)
5 February 2026
Limit for insurance companies
100%
How
Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, new section 3AA of the Insurance Act
| When | Limit for insurance companies | How |
|---|---|---|
| August 2000 | 26% | Sector opened to private and foreign players after the IRDA Act, 1999 |
| 2015 | 49% | Insurance Laws (Amendment) Act, 2015 |
| 2021 | 74% | Finance Act, 2021; IRDAI then amended its Indian insurance company regulations (notified 7 July 2021) |
| 5 February 2026 | 100% | Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, new section 3AA of the Insurance Act |
How Each Step Came About
- check_circle1993: the Malhotra Committee, headed by former RBI Governor R. N. Malhotra, recommended opening insurance to domestic and foreign private companies, with foreign insurers entering through an Indian company, preferably a joint venture.
- check_circle2000: with the sector opened, foreign ownership of an Indian insurer was allowed up to 26 per cent.
- check_circle2015: the Insurance Laws (Amendment) Act, 2015 amended the Insurance Act 1938, GIBNA 1972 and the IRDA Act 1999. It raised the cap to 49 per cent with Indian ownership and control safeguarded, and let foreign reinsurers open branches in India.
- check_circleAfter the Union Budget 2019-20, 100 per cent FDI was notified for insurance intermediaries. That was intermediaries, not insurers.
- check_circle2021: the Finance Act, 2021 raised the insurer limit from 49 to 74 per cent. IRDAI's amendment regulations of 7 July 2021 added a Resident Indian Citizen requirement for directors and key management persons.
- check_circle2025-26: the Sabka Bima Sabki Raksha Act removed the cap. IRDAI reported in July 2026 that two insurers, one life and one general, had already raised foreign shareholding above the earlier 74 per cent threshold.
Sabka Bima Sabki Raksha Act 2025: What Changed
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (Act 40 of 2025) is sometimes searched for as the Insurance Laws Amendment Act 2025 or the insurance amendment bill. It amends three laws: the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the IRDA Act, 1999. The government brought every provision except section 25 into force on 5 February 2026.
The Bill's stated aims were to speed up the sector's growth, protect policyholders better, make business easier for insurers and intermediaries, and bring transparency to regulation-making.
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Key Changes Under the 2025 Act
| Change | What it means |
|---|---|
| Foreign investment up to 100% | New section 3AA of the Insurance Act: foreign holdings in an Indian insurance company may go up to 100% of paid-up equity, on conditions the government prescribes |
| Policyholders' Education and Protection Fund (PEPF) | Constituted under a new section 16A of the IRDA Act, 1999. IRDAI approved regulations to run it in July 2026, for insurance awareness, grievance redressal and tracing unclaimed amounts |
| Follow-up IRDAI regulations | At its 137th meeting (28 July 2026) IRDAI approved amendments on capital structure, share transfers and amalgamation, investment norms, intermediaries and penalties to align with the Act |
Your Study Course Predates This
The IC-26 study course is the Revised Edition 2023, so it stops at the 74 per cent limit. The 100 per cent rule is the law from 5 February 2026. If a question gives 74 per cent as the current cap, check whether it is set before or after the 2025 Act.
Exam Traps
Keep the sequence straight: 26 per cent (2000), 49 per cent (2015 Act), 74 per cent (Finance Act 2021), 100 per cent (2025 Act, in force 5 February 2026). The 100 per cent figure for intermediaries came earlier, after Budget 2019-20; do not confuse it with insurers. The 2015 Act also let foreign reinsurers set up branches.
FAQs
What is the FDI limit in the insurance sector in India?expand_more
Up to 100 per cent of an Indian insurance company's paid-up equity, under section 3AA of the Insurance Act, 1938, in force from 5 February 2026. Foreign investment is subject to conditions prescribed by the government.
Which law allowed 100% FDI in insurance?expand_more
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (40 of 2025). It amended the Insurance Act, 1938, the LIC Act, 1956 and the IRDA Act, 1999.
When did the FDI limit in insurance go from 49% to 74%?expand_more
In 2021, through the Finance Act, 2021. IRDAI followed with amendment regulations notified on 7 July 2021.
Does the 100% limit apply to LIC?expand_more
Section 3AA covers Indian insurance companies. LIC is a corporation set up under its own law, the LIC Act, 1956, and its foreign investment limit is set separately in the government's FDI policy. Check the current policy for LIC's figure.
What was the FDI limit when the insurance sector opened?expand_more
26 per cent. The sector opened to private and foreign players in August 2000, after the IRDA Act, 1999.
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