Parliament Passes Sabka Bima Sabki Raksha Bill, Allows 100% FDI In Insurance Sector
The Parliament on Wednesday passed The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, ushering in wide-ranging reforms in the insurance sector, including permitting 100% foreign direct investment in Indian insurance companies and strengthening the regulatory powers of the Insurance Regulatory and Development Authority of India (IRDAI).
The Bill, which was introduced in the Lok Sabha on December 16, 2025, seeks to amend three key legislations governing the sector, namely the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. The government has projected the amendments as a major step towards expanding insurance penetration, attracting foreign capital, and improving policyholder protection.
One of the most significant changes introduced by the legislation is the increase in the FDI cap in Indian insurance companies from the existing 74% to 100% of the paid-up equity capital. The government said this move is expected to attract higher foreign investment, promote competition, and enable insurers to expand their reach, particularly in under-insured and rural areas.
The Bill also eases norms for foreign re-insurers by substantially reducing the net-owned fund requirement from Rs 5,000 crore to Rs 1,000 crore. Net-owned funds comprise paid-up equity capital, free reserves, balance in the share premium account, and capital reserves arising from surplus on sale proceeds. The reduction is aimed at encouraging greater participation of global re-insurers in the Indian market.
Another key amendment relates to the transfer of shares in insurance companies. Under the existing law, IRDAI approval is required for registration of transfer of shares exceeding 1% of the paid-up share capital of an insurer. The Bill raises this threshold to 5%, a move intended to simplify compliance and facilitate smoother corporate transactions.
The legislation also removes the requirement of a minimum paid-up share capital of Rs 100 crore for insurance co-operative societies engaged in life, general, or health insurance. The government said this would promote the growth of cooperative insurance models and enhance access to insurance in smaller and community-based markets.
In a bid to align insurance regulation with emerging financial hubs, the Bill extends the central government's powers to relax or modify the application of the Insurance Act to International Financial Services Centres located in Special Economic Zones. These powers will also apply to insurance intermediaries operating in SEZs and IFSCs within SEZs.
The scope of insurance intermediaries has been expanded under the Bill. In addition to brokers, insurance consultants, and third-party administrators, the definition will now include managing general agents and insurance repositories, bringing more entities under regulatory oversight.
The amendments significantly enhance the powers of IRDAI. The regulator has been empowered to approve schemes of arrangement between insurers and non-insurance companies, supersede the board of directors of an insurer when an administrator is appointed in cases prejudicial to policyholders' interests, and regulate remuneration, commission, or rewards payable to agents and intermediaries. IRDAI's inspection and investigation powers have also been extended to insurance intermediaries.
To strengthen consumer awareness and protection, the Bill provides for the creation of a Policyholders' Education and Protection Fund to be administered by IRDAI. The fund will be used to protect policyholder interests and promote insurance education. It will be financed through grants and donations from governments and institutions, penalties collected by IRDAI, and other sources as may be prescribed by regulations.