INDIA Trends and Developments Contributed by: Shailaja Lall and Uday Opal, Shardul Amarchand Mangaldas & Co
Shardul Amarchand Mangaldas & Co Amarchand Towers 216, Okhla Phase 3 Rd Okhla Phase III Okhla Industrial Estate, New Delhi Delhi 110020 India Tel: +91 11 4060 6060 Email: connect@amsshardul.com Web: www.amsshardul.com Introduction As 2025 drew to a close, India ushered in a new phase for its insurance sector. The Indian Parliament removed the foreign direct investment (FDI) cap for Indian (re)insurers, with the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“Amendment Act”) on 21 December 2025. As of the date of this publication, the Amendment Act is yet to be brought into force by notification of the Central Government. Moreover, the Government swiftly promulgated the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025 (“FI Amendment Rules”), which, together with the Amend- ment Act, represent a significant policy shift. The reforms seek to attract long-term foreign capital and deepen insurance penetration, while simultane- ously strengthening regulatory oversight, governance standards and policyholder protection in an increas- ingly complex and interconnected financial services environment. The result is a framework that is more permissive in relation to ownership and capital, but structured in relation to supervisory and enforcement powers. We discuss below some significant reforms intro- duced by the Amendment Act and FI Amendment Rules, and other key developments which will shape the years ahead. Amendment Act and Regulatory Reforms: Changes to the Insurance Laws The Amendment Act amends key insurance legis- lation, namely the Insurance Act, 1938 (“Insurance
Act”), the Insurance Regulatory and Development Authority Act, 1999 and the Life Insurance Corpora- tion Act, 1956. Removal of FDI limit In terms of the Amendment Act, foreign investment is now permitted up to 100% of the paid-up equity capital of an Indian insurance company under the automatic route, subject to compliance with condi- tions prescribed by the Central Government. With this, global players can set up insurance and reinsur- ance companies in India without diluting control and onboarding a local domestic partner. Foreign insurers will no longer require complex joint ventures to write insurance business in India, once the Amendment Act and related amendments are notified. Share transfers and ownership restructuring The Amendment Act relaxes the thresholds for prior approval of the Insurance Regulatory and Develop- ment Authority of India (IRDAI) for transfer or issu- ance of shares from 1% to 5% of the paid-up equity capital of an insurer. Previously, transfer or issuance of shares which was more than 1% required prior IRDAI approval. The revised threshold reduces the regula- tory burden associated with routine equity issuances, minority stake transfers, employee incentive arrange- ments and internal group reorganisations. However, transfers resulting in the transferee’s share- holding exceeding 5% of the paid-up equity capital of the insurer continue to require prior IRDAI approval.
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