India's Bold Insurance Overhaul: FDI Limit to Reach 100%

The central government proposes significant reforms for the insurance sector, including increasing the FDI limit to 100% and reducing net owned funds for foreign re-insurers. Amendments aim to enhance insurance accessibility, industry growth, and streamline processes, inviting public comments by December 10.

In a transformative move, the central government has introduced a series of proposals aimed at overhauling India's insurance sector. These include increasing the Foreign Direct Investment (FDI) limit in Indian insurance firms from 74% to a full 100%, and allowing insurers to engage in multiple classes of insurance business and activities. Another significant proposal is reducing the net owned funds requirement for foreign re-insurers from Rs 5,000 crore to Rs 1,000 crore.

The government has called for public comments on these proposed amendments to various acts, including the Insurance Act of 1938, the Life Insurance Corporation Act of 1956, and the Insurance Regulatory and Development Authority Act of 1999. These amendments are designed to boost the insurance sector's growth by ensuring accessibility and affordability of insurance for all, fostering industry expansion, and streamlining business processes.

A comprehensive review of the legislative framework, conducted in consultation with the Insurance Regulatory and Development Authority of India (IRDAI) and industry players, has culminated in these reform proposals. The government is also considering empowering the IRDAI to set a lower entry capital requirement, not less than Rs 50 crore, for underserved segments. IRDAI pledges to achieve 'Insurance for All' by 2047, urging the public to provide feedback on these amendments by December 10 via email. Meanwhile, a report by McKinsey highlights the potential for India to save USD 10 billion annually by expanding insurance coverage, stressing the urgency of these reforms.

(With inputs from agencies.)