Insurance Sector Opened to 100% Foreign Investment Under FEMA; LIC Retains 20% Cap

On 2 May 2026, the Ministry of Finance notified the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026, liberalising foreign investment rules in the insurance sector.

These Rules came into force on 2 May 2026.

Key Points:

1. The Rules revises the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA NDI Rules).

2. The amendment replaces Serial No. F.8 in Schedule I of FEMA NDI Rules, redefining sectoral caps and conditions for foreign investment in insurance companies, insurance intermediaries, and the Life Insurance Corporation of India (LIC).

3. Foreign investment up to 100% is now permitted in Indian insurance companies, including investments by foreign portfolio investors.

4. The automatic route has been retained, meaning no prior government approval is required. However, investment remains subject to approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI).

5. All investments must comply with the Insurance Act, 1938 and applicable sector-specific regulations.

6. Despite full foreign ownership being permitted, important governance safeguards remain:

   • At least one among the Chairperson, Managing Director, or Chief Executive Officer must be a resident Indian citizen.

   • Companies will have to comply with the Indian Insurance Companies (Foreign Investment) Rules, 2015 and other regulations notified by IRDAI or the Department of Financial Services.

   • Any increase in foreign investment must follow the pricing guidelines prescribed under FEMA rules.

7. The amendment also permits 100% foreign equity investment in insurance intermediaries, including:

   • Insurance and reinsurance brokers

   • Insurance consultants

   • Corporate agents

   • Third-party administrators

   • Surveyors and loss assessors

   • Managing general agents

   • Insurance repositories

8. Foreign-controlled intermediaries must:

   • Be incorporated as limited companies under the Companies Act, 2013

   • Appoint at least one resident Indian citizen in senior leadership

   • Bring in advanced technology, managerial expertise, and skills

   • Disclose all payments made to group, promoter, or associate entities in IRDAI-prescribed formats

   • If an intermediary is a bank or entity whose primary business lies outside insurance, existing sectoral FDI caps will continue to apply, provided non-insurance revenues exceed 50% of total revenue.

9. Foreign investment in the Life Insurance Corporation of India (LIC) remains limited to 20%, consistent with:

   • The Life Insurance Corporation Act, 1956

   • The Insurance Act, 1938

10. Although LIC is included within the revised framework, it continues to operate under stricter statutory control, reflecting its public sector and strategic character.

11. Foreign portfolio investment (FPI) in insurance companies will continue to be governed by:

    • Chapter IV of the FEMA NDI Rules.

    • SEBI (Foreign Portfolio Investors) Regulations, 2019

12. By allowing 100% FDI under the automatic route, the government has significantly eased foreign participation in India’s insurance sector, while retaining regulatory oversight and strategic safeguards.

Also Read: Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2022

Read more: Foreign Investment in Indian Insurance: What Changed Under the Indian Insurance Companies (Foreign Investment) Amendment 2025 Rules?

[Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026, published on 2-4-2026]