Context: 100% FDI in insurance sector
Government allows 100% Foreign Direct Investment (FDI) in insurance under automatic route → to boost capital inflow and insurance penetration.
Change
- FDI limit: 74% → 100%
- Route: Automatic route (no prior Government approval)
- Meaning: Full foreign ownership allowed in private insurance companies
Coverage
- Insurance companies: Life, General, Health
- Insurance intermediaries: Brokers, Reinsurance companies, Third Party Administrators (TPAs), Surveyors
- Condition: Must be incorporated in India under Companies Act, 2013
Safeguards
- Resident Indian in key roles (Chairperson / Managing Director / Chief Executive Officer)
- Compliance with:
- Insurance Act, 1938
- Companies Act, 2013
- Foreign Exchange Management Act (FEMA), 1999 (Reserve Bank of India norms)
Ownership can be foreign, but control remains regulated within India
Exception — Life Insurance Corporation of India (LIC)
- FDI capped at 20%
- Governed by Life Insurance Corporation Act, 1956
- Maintains Public Sector Undertaking (PSU) character
Pension Linkage
- Pension sector FDI is statutorily linked to insurance sector
- Now 100% FDI allowed in pension funds
Chinese FDI Rule
- Foreign companies with less than 10% Chinese shareholding → allowed under automatic route
- Entities from China / Hong Kong / countries sharing land border with India → require Government approval
Insurance Regulatory and Development Authority of India (IRDAI)
- Statutory body → established under Insurance Regulatory and Development Authority Act, 1999
Functions
- Licensing insurance companies
- Protecting policyholders
- Ensuring solvency and financial stability
- Regulating insurance sector and intermediaries
Even under automatic route, IRDAI regulatory oversight is mandatory
Rationale
- Low insurance penetration in India
- Need for large capital and global expertise
- Support long-term funds (infrastructure + pension sector)
