Budget 2025: India allows 100% FDI in insurance with domestic investment clause

In a landmark move to boost India’s insurance sector, Finance Minister Nirmala Sitharaman on Saturday announced a hike in the Foreign Direct Investment (FDI) limit from 74 percent to 100 percent. However, this enhanced limit will only apply to companies that invest the entire premium within India.

“The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified,” Sitharaman said in her Budget speech—her eighth consecutive one, setting a new record.

Big leap for insurance growth

Industry experts believe this reform will accelerate sectoral expansion, improve penetration, and position India to achieve its ambitious “Insurance for All” target by 2047. The change is expected to be implemented through an Insurance Laws (Amendment) Bill, which is likely to be introduced in this Budget session. Any FDI limit hike in insurance requires an amendment to the Insurance Act, 1938, which governs foreign investment caps in the sector.

Third FDI hike in a decade

•   2021: FDI limit raised from 49 per cent to 74 per cent 

•   2015: FDI cap increased from 26 per cent to 49 per cent

The latest move fully opens India’s insurance sector to foreign investments, attracting significant capital inflows at a time when the country is projected to lead the G20 nations in insurance premium growth, averaging 7.3% annually from 2025 to 2029, according to Swiss Re’s market outlook report.

More competition, innovation, and stability

The reform is expected to boost competition by attracting global insurers, Drive product innovation and better risk coverage and enhance financial stability of insurers

The timing of this move aligns with the ongoing efforts of IRDAI Chairman Debasish Panda, who has been aggressively promoting India’s insurance sector to global investors through international roadshows.

With this bold step, India is set to unlock the full potential of its insurance industry, making coverage more accessible, affordable, and future-ready, say economy watchers.

According to government data, since 2015, when the government liberalised the foreign direct investment, or FDI, norms and allowed 49 per cent FDI at first in 2015 and increased it to 74 per cent in 2021, the sector has received close to ₹54,000 crore in FDI. 

Industry thrilled on FDI hike 

Tapan Singhel, Managing Director & CEO, Bajaj Allianz General Insurance Co Ltd, said “With the move to allow 100% FDI in insurance, we could see India moving towards a future with 1,000 insurers in the next decade. A larger number of players will bring greater competition, leading to enhanced innovation, customer-centric products, and improved service delivery”.

This reform is not just about increasing capital inflows—it is about reshaping the insurance landscape to ensure that every individual and business has access to risk protection., he said.

Anup Rau, MD & CEO, Future Generali India Insurance Company Limited, said that the government’s move to hike the FDI limit to 100 per cent from the current 74 per cent will be instrumental in attracting fresh capital from overseas insurers, thereby securing robust growth for the insurance sector over the next two decades. 

Tarun Chugh, MD & CEO, Bajaj Allianz Life Insurance, said this decision will bring fresh capital to the sector and reflects the government’s continued commitment to making India a prime investment hub for stable, long-term capital.

Chugh said that greater foreign participation will accelerate the adoption of global best practices, introduce innovative products, and elevate customer service standards. 

Additionally, the mandate to invest premiums within India ensures that these funds contribute to domestic economic growth and infrastructure development, he said. 

“The next five years present a significant and an exciting opportunity to propel the industry forward onto greater heights”, Chugh said.

Sanjeev Mantri – MD & CEO, ICICI Lombard said, “The Budget heralds a defining phase in India’s insurance evolution. The liberalization of FDI norms signifies not just capital inflow, but a fundamental shift in how we can revolutionize insurance penetration in India”.

This reform will enable us to bring global best practices, enhanced underwriting capabilities, and innovative InsurTech solutions to serve our diverse customer base, he said.

“The healthcare infrastructure push, particularly in cancer care, comes at a crucial juncture. As insurers, we see this as an opportunity to design specialized health coverage products that can complement the expanding medical infrastructure. This, combined with India’s emerging position as a medical tourism hub, allows us to create comprehensive cross-border health insurance solutions”, Mantri added.

Shailaja Lall, Partner, Insurance & Reinsurance, Shardul Amarchand Mangaldas & Co, said that increasing the FDI limit to 100 per cent underscores the government’s commitment to liberalising the insurance market and boosting foreign investment, aligning with its broader objective of enhancing the ease of doing business in India.

“Allowing 100% FDI means foreign insurers will no longer be required to partner with Indian entities or navigate joint venture agreements that affect control and decision-making rights. This is expected to significantly enhance FDI inflows into the sector, attracting global insurance players who were previously deterred by ownership restrictions”, she added.

However, the proposal appears to come with an important caveat: the increased FDI limit applies only to companies that invest in the entire premium collected within India. 

“This condition is somewhat ambiguous, given that insurance companies are already prohibited from investing policyholder funds outside India, either directly or indirectly. 

It is possible this stipulation is specifically targeted at companies operating in the GIFT City, where regulatory frameworks differ slightly to promote international financial services”, Lall added.