Blitz Bureau
New Delhi: In a significant move to boost foreign investment in India’s insurance sector, the Government is considering a major overhaul of existing regulations. This new wave of reforms aims to eliminate the mandatory requirement for resident Indian citizens to be on the boards and in top management positions of insurance companies with majority foreign investment.
The proposed changes, part of a broader strategy to further liberalize foreign investment rules, come just three years after an initial attempt to attract overseas capital received a lukewarm response. The goal is clear: to draw more global investors into a sector that has yet to see substantial foreign participation despite increased investment limits.
In 2021, the Government raised the foreign direct investment (FDI) cap in insurance firms from 49% to 74%. However, this policy change has not led to the expected influx of foreign capital. Most private insurers in India still have foreign investments hovering around or below the 49% mark. The few exceptions, such as Zurich Insurance Group’s recent announcement to acquire a 70% stake in Kotak Mahindra General Insurance for approximately ₹5,500 crore, highlight the untapped potential.
The Finance Ministry’s department of financial services is preparing to consult on new FDI regulations for the insurance sector. A senior official commented, “The FDI policy has been liberalized across insurance and other regulated financial services sectors, allowing up to 100% investment under the automatic route. Continuing with restrictive operational conditions for foreign investors makes little sense now, hence a review is underway.”
Currently, FDI up to 74% is permitted in insurance companies without requiring government or regulatory approval, while up to 100% FDI is allowed in insurance intermediaries such as brokers and consultants. However, stringent conditions under the Indian Insurance Companies (Foreign Investment)
