NEW DELHI — The Union government on December 16 introduced the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 in the Lok Sabha, proposing sweeping changes to India’s insurance framework that would allow 100 percent foreign direct investment in insurance companies, reduce entry barriers for global reinsurers, and give the Insurance Regulatory and Development Authority of India (IRDAI) wider supervisory powers.
The Bill seeks to amend three cornerstone laws — the Insurance Act, 1938; the Life Insurance Corporation Act, 1956; and the IRDAI Act, 1999 — marking what officials describe as a structural reset aimed at attracting capital, deepening insurance penetration, and strengthening policyholder safeguards in a rapidly expanding market.
India currently permits foreign investors to own up to 74 percent of an insurance company. Raising that ceiling to 100 percent would place India among the most liberalised insurance markets globally, a shift policymakers argue is necessary to meet the country’s growing protection gap in health, life, and disaster coverage.
Lower Barriers for Reinsurers, Easier Share Transfers
A key feature of the proposed law is a sharp reduction in the net-owned fund requirement for foreign reinsurers operating in India — from ₹5,000 crore to ₹1,000 crore. Reinsurers play a critical role in absorbing large or systemic risks, but global players have long argued that India’s capital thresholds were prohibitively high.
The Bill also eases regulatory friction around share transfers. Under existing law, IRDAI approval is required if shares worth more than 1 percent of an insurer’s paid-up capital are transferred. The proposed amendment raises that threshold to 5 percent, a move that could simplify mergers, acquisitions, and strategic investments while still retaining regulatory oversight for significant ownership changes.
Industry executives say these measures could unlock fresh capital flows and encourage consolidation, particularly among smaller or specialised insurers struggling to scale.
Expanding the Regulator’s Reach
The legislation significantly broadens IRDAI’s authority, reflecting a regulatory philosophy that pairs liberalisation with stronger supervision. Under the Bill, IRDAI would gain the power to approve schemes of arrangement involving insurers and non-insurance companies, a provision aimed at tightening oversight of complex corporate restructurings.
The regulator would also be empowered to supersede an insurer’s board and appoint an administrator if it determines that the company is operating in a manner prejudicial to policyholders’ interests. In addition, IRDAI would be able to regulate remuneration, commissions, and rewards paid to insurance agents and intermediaries, including setting limits and disclosure requirements.
Crucially, the Bill extends IRDAI’s inspection and investigation powers to insurance intermediaries — a category that is also expanded to include managing general agents and insurance repositories, alongside brokers, consultants, and third-party administrators.
Policyholder Protection and New Operating Spaces
Beyond capital and regulation, the Bill introduces structural changes aimed at inclusion and consumer protection. It removes the requirement that insurance co-operative societies maintain a minimum paid-up capital of ₹100 crore, a step intended to encourage community-based insurance models, particularly in underserved regions.
The legislation also extends the central government’s powers to modify the application of insurance laws to insurers and intermediaries operating in Special Economic Zones, including International Financial Services Centres located within SEZs — a nod to India’s ambition to build globally competitive financial hubs.
Perhaps most notably, the Bill provides for the creation of a Policyholders’ Education and Protection Fund, to be administered by IRDAI and financed through government grants, penalties collected by the regulator, and other prescribed sources. The fund is designed to support awareness initiatives and strengthen mechanisms that protect consumers in disputes or systemic failures.
Taken together, the proposed changes signal an effort to balance aggressive market opening with tighter institutional safeguards — a recalibration that lawmakers and regulators say is essential as India’s insurance sector enters a phase of rapid growth and heightened complexity.
