Summary: The Ministry of Finance has proposed significant amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015, marking the latest regulatory move towards enabling 100% foreign direct investment in insurance companies. This follows Finance Minister Nirmala Sitharaman’s Budget 2025-26 announcement to review and simplify FDI guardrails and conditionalities, representing a significant shift in India’s approach to foreign investment in the insurance sector. Our blog analyses the key proposals and implications for insurers/ intermediaries and stakeholders from a regulatory standpoint.

The Ministry of Finance, on August 29, 2025, notified a proposal to amend the Indian Insurance Companies (Foreign Investment) Rules, 2015 (“Foreign Investment Rules”). This development represents the most recent regulatory measure undertaken by the Government for the proposed liberalization of FDI in insurance companies to 100%. In November 2024, the Department of Financial Services, Ministry of Finance, had published a proforma, with proposed amendments to the Insurance Act, 1938 (“Insurance Act”), which among other things, sought to enable 100% foreign direct investment (“FDI”) in insurance companies.

Finance Minister Nirmala Sitharaman in her Budget 2025-26 speech made an announcement in relation to the proposed FDI liberalization. She had indicated that the current guardrails and conditionalities associated with FDI will be reviewed and simplified. Subsequently, in February 2025, the IRDAI established a committee tasked with recommending modifications to the IRDAI regulatory framework to support the proposed amendments to the Insurance Act. The final body of law left to be addressed in relation to the proposed liberalization is the Foreign Investment Rules.

The Foreign Investment Rules prescribe conditions for FDI in insurance companies and intermediaries[1], including governance, repatriation of dividend and related-party transactions. The notable conditions are that insurers with FDI are (i) required to have a majority of their directors and key managerial persons as resident Indian citizens; and (ii) at least one among its chairperson or managing director or CEO, is required to be a resident Indian citizen. An Indian insurance company having more than 49% FDI is additionally required to (i) have at least half of its directors as independent directors, unless the chairperson of the Board is an independent director, in which case at least one-third of its directors are required to be independent directors; and (ii) retain at least 50% of its net profit in general reserves for a financial year where dividend on equity shares is paid and for which at any time the solvency margin is less than 1.8x.

The amendments to the Foreign Investment Rules, published on August 29, 2025, propose eliminating all conditions associated with FDI in insurance companies, except for the stipulation that the chairperson or MD/ CEO must be a resident Indian citizen.

It is pertinent to note that the IRDAI (Corporate Governance for Insurers) Regulations, 2024 (“CG Regulations”), already specify that insurers with foreign investment must adhere to the applicable Foreign Investment Rules. Hence, consequential amendments to the CG Regulations are not required to implement the proposed amendments to the Foreign Investment Rules. This is largely attributable to the regulatory reforms implemented by the IRDAI in 2024, which simplified and “future proofed” several key regulations affecting insurers to better address evolving circumstances. However, given that the regulations for insurance intermediaries were not a part of this regulatory reforms exercise, effecting the changes proposed in the Foreign Investment Rules is slightly more complicated.

Presently, the Foreign Investment Rules impose the following conditions on insurance intermediaries with majority foreign investment:

• either the chairman of the board or the CEO or the principal officer or managing director of the insurance intermediary is required to be a resident Indian citizen;
• prior permission from the IRDAI is required for repatriating dividend;  
• restriction on payment to foreign group/ promoter/ subsidiary/ interconnected/ associate entities, beyond what is necessary or permitted by the IRDAI;
• composition of the board of directors and key management persons is required to be as specified by the concerned regulators;
• requirement to bring in the latest technological, managerial and other skill;
• requirement to make disclosures in the formats to be specified by the IRDAI of all payments made to its group or promoter or subsidiary or interconnected or associate entities.

Except for the requirements to (i) introduce latest technological, managerial and other skills and (ii) disclose all payments made to its group, promoter, subsidiary, interconnected or associate entities, in formats to be specified by the IRDAI, the proposed amendments to the Foreign Investment Rules seek to remove all other conditions associated with foreign investment in insurance intermediaries.

It is pertinent to note that in order to implement the conditions of the extant Foreign Investment Rules,the IRDAI notified the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2019 (“IRDAI Intermediaries Amendment Regulations”), wherein therequirement to provide an undertaking in the form as prescribed in Schedule AA of the said regulations (“Schedule AA Undertaking”) was cast on all insurance intermediaries having majority foreign investment. In this Schedule AA Undertaking, in addition to all the restrictions stated under the Foreign Investment Rules (being (a) to (f) above), the undertaking imposes two additional conditions, being: (i) a restriction on payment to related parties beyond 10% of total expenses (other than dividend); and (ii) a requirement to have majority of directors and key managerial persons to be resident Indian citizens. Therefore, to give full effect to the proposed amendments to Foreign Investment Rules for insurance intermediaries, consequential amendments will have to be made to the insurance intermediaries’ regulatory framework, and particularly the requirement and the contents of the Schedule AA Undertaking would need to be consequently modified.

The proposed amendments to the Foreign Investment Rules are a welcome respite for insurers and intermediaries alike. They seek to rationalise the requirements imposed by the Foreign Investment Rules and set out an even-playing field for all insurers and intermediaries, regardless of the foreign shareholding in these entities. The proposal now reflects the approach of the Government, where the conditionalities and guardrails pertaining to FDI in insurance are relaxed. The proposed amendments are open for public suggestions until September 13, 2025. Once the proposed amendments to the Foreign Investment Rules come into effect, the next crucial step to give full effect to the proposed FDI liberalization would be to amend the Insurance Act and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. Three sessions of Parliament have been held since the initial proposal for liberalization was made in November 2024. Hopes are now pinned on the 2025 Winter session of Parliament.

[1] It is pertinent to note that Foreign Investment Rules do not govern foreign investments in insurance intermediaries whose primary business is outside the insurance area and revenues from non-insurance area are higher than 50% of total revenues of such intermediary.