New Delhi: The insurance sector in India is set to gain significant strength following the approval of the Insurance Laws (Amendment) Bill, 2025 by Parliament. The new legislation permits 100 percent foreign direct investment (FDI) in insurance companies and eases regulations for global reinsurance firms.
According to a report by Insurance Asia, these reforms will facilitate easier capital inflow for insurance companies, enhance their financial stability, and boost competition within the market. This is expected to particularly benefit small and medium-sized insurers, thereby reinforcing the overall insurance ecosystem in the country.
The bill raises the foreign investment cap in insurance companies from 74 percent to 100 percent. To accommodate this change, amendments have been made to key governing laws including the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority of India (IRDAI) Act, 1999.
This development comes at a time when capital-related norms for insurance firms are becoming more stringent. Increased foreign investment will ease capital constraints, enabling companies to operate more effectively.
According to CareEdge Ratings, the amendments will also encourage mergers and consolidations among insurance companies, contributing to greater sectoral stability.
Another significant change introduced by the bill is the reduction of the minimum capital requirement for foreign reinsurance companies from ₹5,000 crore to ₹1,000 crore. This move is expected to attract more international firms to enter the Indian market.
The decision is likely to enhance domestic reinsurance capacity and competition while ensuring that essential capital remains within India, benefiting local insurers.
Meanwhile, a report by MK Global Financial Services projects a satisfactory performance for the insurance sector in the third quarter of FY 2026. While insurance premiums are expected to rise, profits may remain under pressure due to GST input tax credit losses, higher commission payouts, and regulatory changes.
Industry bodies have welcomed the bill, stating that it will bring clarity, confidence, and sustained capital inflows into the insurance sector, thereby strengthening financial security for the public.
The bill also provides additional concessions to insurance companies operating in Special Economic Zones and International Financial Services Centres. The central government will now be able to frame separate insurance regulations for these zones, promoting international insurance activities.