Insurance Laws Amendment Bill Proposes Major Sector Overhaul

Government moves to enable 100% FDI, composite licences and relaxed capital norms

The government is preparing to introduce the Insurance Laws (Amendment) Bill, 2025 in the ongoing Lok Sabha session, marking one of the most extensive reforms to India’s financial regulatory framework in years. The Bill aims to expand foreign participation, simplify entry barriers and strengthen competition in an industry where insurance penetration remains below the global average. The reform follows the February 2025 announcement raising the FDI ceiling from 74% to 100%.

Mission and Objective
The proposed legislation seeks to attract global capital, improve product diversity and enhance efficiency through deeper foreign participation. It aims to strengthen insurers’ capacity for digital transformation, risk modelling and expansion into underserved markets.

Another key objective is to modernise India’s insurance architecture by enabling composite licences, simplifying distribution rules and updating solvency and capital norms. This aligns with the IRDAI’s long-term vision of achieving “Insurance for All by 2047.”

Current Status
The Bill is expected to be tabled during the current parliamentary session. Amendments will impact the Insurance Act (1938), LIC Act (1956) and IRDA Act (1999). No delays have been indicated, though regulatory preparedness and market transition issues remain under discussion.

Technical Details — Key Provisions

• 100% foreign ownership permitted

• Composite licences for life & non-life business

• Capital requirement rationalisation; captive insurers introduced

• Net-owned fund requirement for foreign reinsurers cut from ₹5,000 cr to ₹500 cr

• Intermediaries allowed multi-insurer engagement

Roadmap — Next Steps

• Parliamentary review and passage — Lok Sabha & Rajya Sabha

• Regulatory framework update — IRDAI

• Industry transition planning — Insurers & JV partners

• Distribution and consumer-protection reforms rollout — IRDAI

Exam-Oriented Key Points

• Bill aims at sector liberalisation and global alignment

• Enables 100% FDI; introduces composite licences

• Reduces capital norms, boosts reinsurance competition

• Supports Insurance for All by 2047