The Indian Government has proposed a significant reform in the insurance sector by raising the FDI limit from 74% to 100%.
Alongside the FDI increase, the government has suggested allowing insurers to offer multiple classes of insurance business and activities.
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A notable change includes reducing the net owned funds (NOF) requirement for foreign reinsurers from $50bn (Rs4.24bn) to $10bn, aimed at making the sector more reachable to foreign investors.
The public has been invited to provide feedback on these proposed amendments to legislations, such as the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority (IRDA) Act, 1999.
The goal of these proposals is to improve the reach and affordability of insurance, while fostering the sector’s expansion and modernisation.
A government office memorandum stated that the legislative framework for the insurance sector underwent a thorough review in collaboration with the Insurance Regulatory and Development Authority of India (IRDAI) and industry participants.
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By GlobalDataThe government also intends to authorise the IRDAI to set lower minimum capital requirements of no less than $500m for insurers targeting under-served or un-served market segments.
The government’s initiative to liberalise the insurance market aligns with its vision of achieving “Insurance for All” by 2047, as highlighted by the IRDAI.
Individuals are asked to submit their comments on the proposed amendments by 10 December 2024.
The FDI limit in the insurance sector was last raised, from 49% to 74%, in 2021.
According to the Economic Survey 2023–24 released by the government in July this year, the overall insurance penetration in India slightly decreased to 4% in fiscal year 2023 (FY2023) from 4.2% in FY2022. The life insurance segment saw a decline from 3.2% in FY2022 to 3% in FY2023, while the non-life insurance segment remained steady at 1%.
