Foreign Investment In Insurance Sector: Key Takeaways From The 2026 Amendment

The Department for Promotion of Industry and Internal Trade, Ministry of Finance had, in February 2026, issued Press Note 1 (2026 Series) (“Press Note 1”) which proposed increasing the foreign investment cap to 100% in the insurance sector. The Press Note 1 provided that the change would only take effect from the date of notification under the Indian foreign exchange control regulations. Subsequently the Ministry of Finance has issued the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2026 (“2026 Amendment”) updating the Indian foreign investment framework applicable to the insurance sector.

What Has Changed

Firstly, prior to the 2026 Amendment, foreign investment in insurance companies was capped at 74% under the principal Indian foreign exchange control regulations, i.e. the Foreign Exchange Management (Non-debt Instruments) Rules, 2026 (“NDI Rules”). The revised cap of 100% is now in line with the foreign investment cap for insurance companies introduced last year through Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 under the Insurance Act, 1938. It is important to note that even though Reserve Bank of India (“RBI”) approval would not be required under the NDI Rules for foreign direct investment as it is now permitted upto 100% under the automatic route, it is still necessary to seek approval and verification of the Insurance Regulatory and Development Authority of India (“IRDAI”).

Secondly, the 2026 Amendment also relaxes the earlier requirement for insurance companies to maintain a majority of resident directors and key managerial personnel, providing greater flexibility in governance structures with the revised requirement only being that at least one among the Chairperson, Managing Director or Chief Executive Officer should be a resident Indian citizen.

Lastly and in a major relief to insurance intermediaries with foreign investment, the 2026 Amendment removes the requirement for such insurance intermediaries to: (i) obtain IRDAI’s prior approval to repatriate dividends; (ii) not make any payments to foreign group, promoter, subsidiary, interconnected or associate entities beyond what is necessary or is permitted by IRDAI; and (iii) compose the board of directors and key management persons as per the specification of IRDAI.

The 2026 Amendment consolidates the position by expressly restating the sectoral caps, entry routes and applicable conditions within the NDI Rules.

Key Takeaways

The 2026 Amendment amends the NDI Rules to bring them in line with insurance laws on the quantum of permitted foreign direct investment as well as makes corresponding liberalization changes to the governance structure for insurance companies as well as aims to also reduce friction points of insurance intermediaries with foreign investment.

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