FinMin notifies amended foreign investment rules for insurers after FDI cap raised to 100%

The Finance Ministry has notified amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015, aligning the regulatory framework with the government’s decision to allow up to 100% foreign direct investment (FDI) in the insurance sector.

Under the revised framework, the government has replaced references to “total foreign investment” with “foreign direct investment,” bringing the rules in line with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

The notification also updates multiple definitions to replace older FEMA regulations with the current non-debt instruments regime.

A key change relates to ownership limits.

Earlier, foreign investment in Indian insurance companies was capped at 74% of paid-up equity capital. The amended rules now state that foreign direct investment may go up to the limit specified under the Insurance Act, 1938, effectively operationalising the 100% FDI cap announced earlier.

The notification also modifies governance norms for insurers with foreign investment. It mandates that at least one among the Chief Executive Officer, Managing Director, or Chairperson of the board must be a resident Indian citizen.

This requirement applies irrespective of the level of foreign ownership.

Additionally, the rules explicitly include investments by Foreign Venture Capital Investors (FVCIs) within the definition of foreign direct investment, subject to permissibility under FEMA norms.

Certain clauses under the earlier rules have also been omitted to remove overlaps with updated foreign exchange regulations.

Commenting on the notification, the Department of Financial Services (DFS) Secretary said the amendments are intended to provide regulatory clarity and ensure adequate Indian management presence while facilitating higher foreign participation in the insurance sector.

The government had announced the decision to raise the FDI cap in insurance to 100% as part of broader reforms aimed at attracting long-term capital, improving insurance penetration, and strengthening the sector’s growth potential.