NEW DELHI: Increasing the foreign direct investment (FDI) cap in Indian insurance companies from 74 per cent to 100 per cent will attract more players to the market and create employment opportunities, Finance Minister Nirmala Sitharaman told Parliament on Tuesday.
Announced in the Union Budget on February 1, 2025, the proposal is also expected to improve technology adoption and automation, leading to faster underwriting and claims processing, reduced costs, and greater efficiency, she said.
The Insurance Act, 1938 governs insurer investments, with strict emphasis on safety, liquidity, and regulatory oversight in line with policyholder interests.
Insurers must invest a fixed proportion of funds in government and other approved securities specified by the Insurance Regulatory and Development Authority of India (IRDAI) and cannot invest funds outside India.
To ensure financial stability and protect policyholders, insurers are required to maintain assets exceeding liabilities by at least 50 per cent of the minimum capital amount, and IRDAI mandates a solvency ratio of 150 per cent at all times.
Regulatory powers
The regulator also has powers to supersede a company’s board and appoint an administrator if operations are found prejudicial to policyholders.
Insurance companies, as per the Companies Act, 2013, must comply with governance norms and operate under the Indian Insurance Companies (Foreign Investment) Rules, 2015, covering dividend payouts, profit repatriation, and board composition.
Sitharaman said these provisions ensure transparency, fair practices, and strong safeguards.
Replying to another question, she informed that the maximum continuous tenure for directors of cooperative banks -excluding chairpersons and whole-time directors – has been extended from 8 years to 10 years after amendments to Section 10A (2a)(i) of the Banking Regulation Act, 1949. The change took effect on August 1, 2025.
