100% FDI in Insurance Companies and Insurance Intermediaries in India: FEMA Framework, Regulatory Evolution, Investment Structuring and Strategic Implications

Executive Summary

The Government of India has, with effect from 5 February 2026, permitted 100% foreign direct investment (FDI) in Indian insurance companies and insurance intermediaries. This reform, implemented through the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 and corresponding amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA NDI Rules), represents the final and most significant step in a 25-year liberalisation trajectory. For global insurance groups, the reform enables wholly owned Indian subsidiaries, full strategic control, and unrestricted capital deployment. For existing joint ventures, it triggers immediate questions of ownership restructuring, exit mechanisms, and M&A strategy under FEMA and IRDAI frameworks. This article provides a structured legal and regulatory analysis of the new framework.

I.  Introduction: A Transformational Reform in India's Insurance Investment Regime

India's insurance sector has historically been characterised by gradual regulatory liberalisation combined with robust prudential supervision by the Insurance Regulatory and Development Authority of India (IRDAI). The sector's ownership architecture has, since 2000, been shaped principally by successive increases in the permissible foreign investment ceiling — from 26% to 49%, and subsequently to 74%.

In 2025–2026, the Government of India completed this liberalisation process by removing the foreign investment cap entirely. The new framework, effective from 5 February 2026, permits 100% foreign ownership of Indian insurance companies and insurance intermediaries, establishing India as one of the most open insurance markets in the Asia-Pacific region.

The reform was implemented through three principal instruments: the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025; amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015; and corresponding revisions to Schedule I of the FEMA NDI Rules, 2019, which set out the sectoral caps applicable to foreign investment in India.

This reform reflects a broader policy objective — described by the government as 'Insurance for All by 2047' — requiring substantial capital expansion, greater product innovation, and improved insurance penetration across underserved segments of the Indian population.

II.  Progressive Liberalisation of FDI in the Insurance Sector: A 25-Year Trajectory

2.1 Initial Opening of the Sector (2000): 26% FDI Cap

India opened its insurance sector to private participation in 2000 through the Insurance Regulatory and Development Authority Act, 1999. Given the sector's systemic importance and long-term policyholder obligations, foreign investment was initially restricted to a 26% ceiling.

This framework required all foreign insurers to enter the Indian market through joint venture structures with Indian promoters, shaping an industry architecture that persisted for over a decade. During this period, nearly every private insurance company in India operated as a bilateral joint venture between a global insurer and an Indian corporate group.

2.2  Liberalisation to 49% (2015)

The Insurance Laws (Amendment) Act, 2015 increased the FDI ceiling to 49%, enabling foreign investors to hold a significant minority position. However, the requirement for Indian partner involvement remained, and control of insurance companies — in terms of board composition, management appointments, and key decisions — was retained by Indian promoters in most structures.

2.3 Majority Ownership Permitted at 74% (2021)

In 2021, the FDI ceiling was further expanded to 74%, allowing foreign insurers to obtain majority ownership for the first time. This liberalisation was accompanied by certain Indian governance safeguards — including requirements for majority Indian representation on the board of directors and reservation of key management positions for resident Indian citizens — conditions which continue to apply in modified form under the current framework.

2.4 Full Liberalisation: 100% FDI Permitted from 5 February 2026

The 2025 amendments have removed the residual foreign investment ceiling entirely. Foreign investors may now hold 100% of the paid-up equity capital of Indian insurance companies and insurance intermediaries, subject to licensing, solvency, and governance requirements under the IRDAI Act, 1999 and applicable regulations.

III.  Legislative and Regulatory Framework Enabling 100% FDI

3.1  The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (the '2025 Act') provides the primary legislative foundation for the revised foreign investment framework. The 2025 Act amended the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the General Insurance Business (Nationalisation) Act, 1972.

Section 3AA of the Insurance Act, 1938: The 2025 Act introduced Section 3AA into the Insurance Act, which authorises the Central Government to prescribe, by rules, the maximum level of foreign investment permissible in Indian insurance companies. Critically, this provision decouples the FDI ceiling from the statute itself, vesting the government with flexibility to further calibrate foreign investment levels through subordinate rules and policy instruments without requiring further legislative action.

This drafting approach — mirroring the structure adopted in other sectors such as aviation and telecommunications — allows the government to respond to evolving market conditions or policy priorities without the delays inherent in parliamentary processes.

3.2 Indian Insurance Companies (Foreign Investment) Rules, 2015 (as Amended)

The Indian Insurance Companies (Foreign Investment) Rules, 2015 constitute the primary subordinate legislation governing the conditions attached to foreign investment in insurance companies. The 2025 amendments revised these Rules to remove the 74% ceiling and substitute a 100% limit.

Key conditions retained under the amended Rules include:

The requirement for at least one of the Chairperson, Managing Director, or Chief Executive Officer to be a resident Indian citizen.

Compliance with IRDAI's governance, solvency, and investment regulations.

Maintenance of minimum capital requirements as prescribed by IRDAI from time to time.

3.3 FEMA NDI Rules, 2019: Schedule I and Sectoral Amendments

From a foreign exchange law perspective, foreign investment in Indian companies is primarily governed by the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA NDI Rules), issued under the Foreign Exchange Management Act, 1999 (FEMA).

Schedule I to the FEMA NDI Rules sets out the sector-specific foreign investment caps, conditions, and entry routes for all sectors in which FDI is permitted in India. The insurance sector is enumerated in Schedule I, and the amendments effective from 5 February 2026 have revised the relevant entry to reflect the 100% FDI ceiling.

Under the revised Schedule I: Foreign investment in Indian insurance companies is permitted up to 100% of the paid-up equity capital under the automatic route, subject to regulatory verification by IRDAI. Insurance intermediaries are also listed as a separate sub-category with a 100% automatic route limit. All general conditions under the FEMA NDI Rules — including pricing guidelines under Rule 21, reporting obligations under Rule 27, and valuation norms — continue to apply to FDI transactions in the insurance sector.

Regulatory Note: Automatic Route vs Government Route. Under the revised framework, FDI in insurance up to 100% is available under the automatic route — meaning that prior approval of the Foreign Investment Promotion Board (FIPB) or the competent authority is not required. Foreign investors are required to notify the Reserve Bank of India through the Foreign Investment Reporting and Management System (FIRMS) within the prescribed timelines following the completion of a foreign investment transaction.

IV.  Scope of 100% FDI: Permitted Entity Types

4.1 Insurance Companies

The revised framework permits 100% foreign ownership in Indian insurance companies, including entities licensed by IRDAI to carry on:

• Life insurance business

• General insurance business (including motor, fire, marine, property, and liability insurance)

• Health insurance business (standalone health insurers)

• Reinsurance business (including foreign reinsurance branches registered in India)

  
  

Foreign insurers may, accordingly, establish wholly owned insurance subsidiaries in India or acquire complete ownership of existing joint venture insurance companies through secondary share transfers, subject to FEMA pricing norms and IRDAI approval.

4.2 Insurance Intermediaries

The liberalisation equally applies to insurance intermediaries. The following categories of IRDAI-licensed intermediaries are eligible for 100% foreign ownership:

• Direct insurance brokers and reinsurance brokers

• Composite brokers (licensed to place both direct and reinsurance business)

• Corporate agents (banks, NBFCs, and other entities distributing insurance)

• Insurance marketing firms

• Third-party administrators (TPAs) providing health claims management

• Insurance web aggregators and digital distribution platforms

• Surveyors and loss assessors

This broad scope reflects the government's intent to attract foreign capital and technology across the insurance value chain — not merely at the underwriting level but equally in distribution, claims management, and digital infrastructure.

However, one important qualification applies: where an insurance intermediary forms part of a regulated financial institution — such as a bank or a non-banking finance company — the foreign investment limits applicable to the parent sector may continue to govern the overall investment structure. Investors should therefore assess the upstream ownership structure carefully before proceeding with intermediary acquisitions.

V.  Investment Structuring Under FEMA: Entry Routes, Pricing Norms and Downstream Investment

5.1 Entry Routes Available to Foreign Investors

Foreign investors may structure their entry into the Indian insurance sector through several routes under the FEMA NDI Rules:

• Greenfield incorporation: A foreign insurer may incorporate a wholly owned Indian subsidiary and apply for a fresh licence from IRDAI. This route requires compliance with IRDAI's minimum capital norms (INR 100 crore for life and general insurers; INR 200 crore for reinsurers) and the full licensing process.

• Secondary acquisition: A foreign investor may acquire shares of an existing Indian insurance company from Indian shareholders or from an existing foreign partner. Pricing for secondary acquisitions must comply with Rule 21 of the FEMA NDI Rules, which requires pricing to be determined on an arm's length basis using a Board-approved valuation methodology in accordance with internationally accepted pricing methods.

• Primary capital infusion: A foreign investor may subscribe to newly issued shares of an existing Indian insurance company. This route requires compliance with FEMA pricing norms for primary issuances, which mandate that shares be issued at a price not less than fair value as determined in accordance with the applicable guidelines.

5.2 FEMA Pricing and Valuation Requirements

One of the most practically important aspects of structuring foreign investment in insurance companies — whether through secondary acquisition or primary issuance — is compliance with FEMA pricing norms.

Under Rule 21 of the FEMA NDI Rules, the price at which shares of an Indian company may be transferred to or from a non-resident investor must be determined on the basis of fair market value. For listed companies, SEBI's pricing regulations under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Code) apply in addition to FEMA norms. For unlisted companies, the fair value is determined by a SEBI-registered merchant banker or a chartered accountant using internationally accepted valuation methods, including the discounted cash flow method.

The pricing requirement is relevant not only to the headline acquisition price but also to the structuring of call options, put options, or other exit rights commonly embedded in joint venture agreements. The RBI's position that option pricing must comply with FEMA norms — and that options cannot guarantee a fixed return to a foreign investor — remains an important structural constraint in insurance JV restructuring transactions.

5.3 Downstream Investment by Foreign-Owned Insurance Holding Companies

A significant and underappreciated dimension of the 100% FDI reform relates to downstream investment. Where a foreign-owned Indian insurance company (or an Indian holding company with majority foreign ownership) proposes to invest in another Indian insurance entity, the downstream investment rules under the FEMA NDI Rules and the Foreign Exchange Management (Overseas Investment) Rules, 2022 must be assessed. Under the FEMA framework, an Indian company that is owned or controlled by non-residents is treated as having 'indirect foreign investment' flowing through it. Downstream investments by such entities into other Indian companies are subject to the following principles:

• The downstream entity must not be engaged in a sector in which foreign investment is prohibited.

• The aggregate direct and indirect foreign investment in the downstream entity must not exceed the sectoral cap applicable to that entity's sector.

• Where an Indian holding company with 100% foreign ownership proposes to make a downstream investment in another insurance entity, the indirect foreign investment flowing through would count toward the 100% sectoral cap of the downstream entity.

   

Given that the insurance sector now has a 100% FDI ceiling, downstream investment by a wholly owned foreign insurance entity into another Indian insurance company is permissible, provided the aggregate foreign investment in the downstream entity does not exceed 100%. Investors structuring multi-entity insurance group structures in India should obtain specific FEMA advice on the inter-company investment framework before proceeding.

VI.  M&A Implications: Restructuring Existing Insurance Joint Ventures

The removal of the foreign investment ceiling is likely to trigger a significant wave of ownership restructuring within existing insurance joint ventures. The majority of India's private insurance companies were historically constituted as bilateral JVs between global insurers and Indian corporate groups, with ownership structures calibrated to the prevailing FDI limits. The new framework raises several important M&A and structuring questions.

6.1 Call Options and Exit Rights in Existing JV Agreements

Many insurance joint venture agreements entered into since 2015 — and particularly since 2021 — contain provisions entitling the foreign partner to increase its stake to the then-maximum FDI limit, or to acquire the Indian partner's residual stake upon certain trigger events.

With the FDI ceiling now at 100%, foreign partners holding such options may seek to exercise their right to acquire the remaining Indian shareholding. The exercise of such options will be subject to:

• FEMA pricing norms: The exercise price must comply with the fair market value requirements under Rule 21, regardless of the contractually agreed option price. Where an option price would result in a transfer below fair market value, FEMA compliance issues arise.

• IRDAI approval: Any material change in ownership or control of a licensed insurance company requires prior approval from IRDAI under the IRDAI (Issuance of Capital by Indian Insurance Companies) Regulations, 2022.

• SEBI Takeover Code: For listed insurance companies, acquisitions exceeding the thresholds specified in the Takeover Code trigger mandatory open offer obligations regardless of the FDI reform.

6.2 Transfer of Shares and FEMA Reporting

Secondary transfers of shares in Indian insurance companies from Indian residents to non-residents — or between non-resident investors — must be reported to the RBI through the FIRMS portal. The reporting obligation arises within 60 days of the completion of the transaction.

Where the transfer involves a change in control of a licensed insurer, the prior approval of IRDAI is required before completing the transaction. Given IRDAI's broad supervisory mandate over licensee fitness and propriety, regulators will scrutinise the acquirer's financial strength, group structure, and governance credentials as part of the approval process.

6.3 Merger and Consolidation: NCLT and IRDAI Process

The 100% FDI reform may also facilitate intra-group mergers between foreign-owned Indian insurance entities and their parent or affiliate structures. Such mergers would be governed by the Companies Act, 2013 scheme of arrangement process before the National Company Law Tribunal (NCLT) and would additionally require IRDAI's prior approval under the Insurance Act, 1938.

From a FEMA perspective, cross-border mergers involving Indian insurance companies are subject to the FEMA (Cross Border Merger) Regulations, 2018, which permit inbound mergers (foreign company merging into an Indian company) subject to RBI approval.

VII.  Governance and Regulatory Conditions: Retained Safeguards

Although the foreign investment ceiling has been removed, the regulatory framework continues to retain targeted safeguards designed to protect policyholders and preserve supervisory accountability.

7.1 Resident Indian Citizen Requirement

Under the amended Indian Insurance Companies (Foreign Investment) Rules, 2015, at least one of the following senior positions must be held by a resident Indian citizen:

• Chairperson of the Board of Directors

• Managing Director

• Chief Executive Officer

  
  

This requirement ensures that the primary interlocutors between the insurance regulator and the company include at least one individual with deep familiarity with the Indian regulatory environment and direct accountability to IRDAI.

7.2 IRDAI Prudential and Governance Requirements

Regardless of ownership structure, all insurance companies licensed by IRDAI remain subject to the full suite of prudential and governance requirements applicable to the Indian insurance sector. These include:

• Minimum capital and solvency margin requirements under the IRDAI (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2016.

• Investment norms governing the deployment of policyholder funds under the IRDAI (Investment) Regulations, 2016, including the requirement to maintain a significant portion of investments in government securities and approved Indian assets.

• Board composition, fit-and-proper criteria for key management personnel, and corporate governance standards under the IRDAI (Governance, Transparency and Disclosures) Regulations.

• Product and pricing approvals required before any insurance product is offered to the public.

These requirements collectively ensure that the liberalisation of ownership rules does not compromise the soundness of the insurance market or policyholder protections — an important consideration given the long-term liability profile of insurance companies.

VIII.  Strategic Implications for Foreign Investors and the Indian Insurance Market

8.1 Full Strategic Control and Capital Flexibility

For global insurance groups, the ability to hold 100% ownership of an Indian insurance company eliminates the principal structural constraint that has historically limited their strategic autonomy in the Indian market. Without an Indian joint venture partner, foreign insurers can:

• Deploy capital at the scale and pace dictated by their global group strategy, rather than requiring the agreement of a JV partner.

• Fully consolidate the Indian subsidiary within their global group accounts, improving capital efficiency and reporting consistency.

• Directly implement global product design, underwriting standards, technology infrastructure, and distribution models without negotiating adaptations with an Indian partner.

  
  

8.2 Market Consolidation and Ownership Restructuring

The reform is expected to catalyse material ownership changes across India's private insurance sector. Several large joint ventures — particularly in the life insurance segment — involve global insurers holding minority or majority (but less than 100%) stakes alongside Indian corporate partners. Where the foreign partner has strategic interest in full ownership, and where the JV agreement provides appropriate mechanisms, acquisition of the Indian partner's residual stake is now commercially and legally feasible.

Equally, the reform may attract new entrants — global insurance groups that declined to enter the Indian market under a mandatory JV structure may now consider greenfield entry as a wholly owned subsidiary. This could increase competitive intensity in segments such as commercial lines, marine insurance, and speciality liability.

8.3 Technology, Digital Insurance, and IRDAI Regulatory Sandbox

The presence of wholly owned foreign insurance subsidiaries is expected to accelerate the adoption of advanced insurance technologies in India, including AI-driven underwriting, embedded insurance distribution, and automated claims management. Importantly, these innovations can now be deployed as part of a globally integrated operating model rather than as bespoke adaptations for a JV structure.

IRDAI's regulatory sandbox framework, introduced in 2019 and significantly expanded since, provides a structured pathway for insurers to test innovative products and distribution models. Foreign-owned insurers with access to proven global technology platforms are well positioned to leverage this framework. Additionally, the government's Bima Vistaar initiative — aimed at delivering a basic insurance product to all households — presents a large-scale distribution opportunity that may attract global insurers with experience in microinsurance and mass market products.

8.4 Data Governance and Cross-Border Data Considerations

A critical operational consideration for wholly owned foreign insurance subsidiaries relates to data governance. Indian insurance companies are subject to IRDAI's data localisation requirements, which mandate that policyholder data be maintained in India. In addition, the Digital Personal Data Protection Act, 2023 (DPDP Act) imposes obligations on data fiduciaries — including insurance companies — relating to data processing, consent, and cross-border data transfers.

Foreign insurers operating wholly owned Indian subsidiaries must therefore structure their global data management frameworks carefully to ensure compliance with Indian localisation requirements while maintaining the operational efficiencies of a globally integrated model. Obtaining specific advice on the intersection of DPDP Act obligations and the cross-border transfer of insurance data is recommended at the structuring stage.

IX.  Key Regulatory Approvals Required for Foreign Investment in Insurance

X.  Conclusion: A New Architecture for Global Insurance Capital in India

The introduction of 100% FDI in insurance companies and intermediaries represents the most consequential structural reform in India's insurance sector since its opening to private participation in 2000. By aligning the foreign investment framework with international norms and removing the mandatory joint venture requirement, the government has created conditions for a more deeply capitalised, technologically advanced, and globally integrated insurance market.

For foreign insurers and global investors, the reform opens three distinct strategic pathways: full acquisition of existing joint venture stakes, greenfield entry as wholly owned subsidiaries, or strategic consolidation through acquisition of existing licensees. Each pathway carries distinct FEMA, IRDAI, and corporate law implications that require careful structuring.

At the same time, the reform does not represent unregulated liberalisation. IRDAI's comprehensive supervisory framework — encompassing solvency, governance, investment regulation, and policyholder protection — remains firmly in place. The success of this reform in achieving its objectives of increased insurance penetration and capital deepening will ultimately depend on the regulator's capacity to supervise a more globally integrated market, and on foreign investors' willingness to commit long-term capital to a sector characterised by deep structural opportunities and equally deep structural complexities.

Disclaimer

The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.

For further queries or details, you may contact:

Mrs. Kritika Krishnamurthy

Founding Partner

AK & Partners

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