The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 was passed by Parliament on December 17, 2025 and allows up to 100% foreign direct investment in insurance companies. It amends the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the IRDAI Act, 1999. Key verified reforms include a higher FDI ceiling, a reduction in the net owned fund requirement for foreign reinsurance branches from Rs 5,000 crore to Rs 1,000 crore, one-time licensing for insurance intermediaries, a higher 5% threshold for prior approval on transfer of share capital, and a Policyholders' Education and Protection Fund. The final Bill did not include composite licences for one insurer to offer life and non-life products under one entity. Current data also needs updating: India's insurance penetration dropped to 3.7% in FY25, while the global average stood at 7.3%.
Sabka Bima Sabki Raksha Act 2025: 100% FDI in Insurance, But No Composite Licence
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 was passed by Parliament on December 17, 2025, allowing up to 100% FDI in insurance companies. It reduced the net owned fund requirement for foreign reinsurance branches from Rs 5,000 crore to Rs 1,000 crore and introduced one-time licensing for intermediaries, but the final Bill did not include composite licences. India's insurance penetration dropped to 3.7% in FY25 against a global average of 7.3%.
Key facts
- Insurance Laws Amendment Act 2025 raises FDI cap in insurance from 74% to 100%.
- The Act is branded under the 'Sabka Bima Sabki Raksha' initiative aligning with IRDAI's Vision 2047.
- A composite insurance licence will allow one entity to offer both life and general (non-life) insurance.
- Minimum capital requirement for foreign reinsurance branches (FRBs) operating in India is reduced.
- India's insurance penetration stands at approximately 4.2% of GDP, well below the global average of 7%.
- FDI in insurance was previously raised from 49% to 74% in 2021; the new Act takes it to 100%.
Mains angle
Q: Discuss the key reforms introduced by the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 and evaluate their likely impact on India's insurance penetration.
Answer (50 words):
The Bill allows up to 100% FDI, lowers foreign reinsurance branch net owned fund from Rs 5,000 crore to Rs 1,000 crore, strengthens oversight and adds one-time intermediary licensing. It did not include composite licences. With FY25 penetration at 3.7% against a 7.3% global average, capital and distribution remain crucial.
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Source: PRS Legislative Research
Frequently asked questions
What is the headline reform in the Insurance Laws Amendment Act 2025?
The headline reform is the increase in the FDI cap in the insurance sector from 74% to 100%, allowing fully foreign-owned insurance companies to operate in India subject to IRDAI licensing. The Act also introduces composite insurance licences and reduces capital requirements for foreign reinsurance branches.
What is the 'Sabka Bima Sabki Raksha' initiative?
'Sabka Bima Sabki Raksha' (Insurance for All, Protection for All) is the government's branding for the insurance sector reform drive, aligned with IRDAI's Vision 2047 goal of ensuring every Indian household has at least one form of life, health, or property insurance coverage by 2047.
What is a composite insurance licence as introduced by the 2025 Act?
A composite insurance licence allows a single insurance entity to offer both life insurance and general (non-life) insurance products under one regulatory licence, reducing compliance complexity and operational costs for insurers.
What was India's insurance penetration rate at the time of the 2025 Act?
India's insurance penetration stood at approximately 4.2% of GDP at the time of the 2025 Act, significantly below the global average of approximately 7%. The Act aims to attract foreign capital and expand the insured population to improve this metric.
How has the FDI cap in insurance evolved in India?
The FDI cap in insurance has been raised progressively: from 26% (original IRDA Act) to 49% (Insurance Laws Amendment Act 2015), to 74% (2021), and now to 100% under the Insurance Laws Amendment Act 2025 — reflecting India's gradual opening of the sector to foreign participation.
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