Kathmandu. The Union Cabinet has approved the Insurance Amendment Bill, 2025 to increase the foreign direct investment (FDI) limit in the insurance sector from 74 percent to 100 percent.
The amendment bill approved by Friday’s meeting of the Council of Ministers will now be tabled in the Federal Parliament.
According to the Government of India, this amendment will attract long-term and sustainable foreign investment and facilitate technology transfer. The decision is expected to have a long-term impact in meeting Government of India’s vision of “Insurance for All by 2047”.
Foreign investment in India’s insurance sector is about Rs 82,000 crore in life, non-life and health insurance.
Key features of the bill:
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- Insured Literacy and Protection Fund to be set up to strengthen the protection of the insured
- Power to refund ill-gotten gains to Insurance Regulatory Authority of India
- Legal Basis of Digital Infrastructure in Insurance Sector
- Provision for one-time registration of an insurance intermediary
- Net Owned Fund for Foreign Insurers reduced from Rs. 50 billion to Rs. 10 billion
- Life Insurance Corporation (LIC) gets more autonomy in zonal offices and overseas operations
- New provisions to make regulation and fines transparent
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The limit of prior approval of the insurance regulator on transfer of share ownership has been increased from 15 to 55 percent
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In addition, at least one of the top managers such as chairman, managing director or chief executive should be an Indian national. Mergers between insurance companies and non-insurance companies have also been allowed.
Industry Response
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Leading executives in the insurance sector called the decision “historic and transformative”. Tapan Singhel, chief executive officer of Bajaj General Insurance, said that even if only a few of the 10,000 insurance companies in the world enter India, there is a possibility of bringing in investment worth Rs 10 lakh crore.
Legal experts have given examples of previous policy changes that have not brought the expected investment, suggesting caution.
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The opening up of hundred percent foreign investment in the insurance sector in India is considered an important sign for the financial sector in South Asia. It can set new benchmarks in insurance technology, reinsurance capacity, risk management and digital services. Analysts say that its impact can be seen in Nepal’s insurance market in the future.
Foreign investment in the insurance sector is limited in Nepal. Except for Life Insurance Corporation Nepal, foreign investment in the insurance companies with joint foreign investment is gradually shrinking. Foreign investors completely exited the former United (now United Ajod) Insurance.
The foreign collaborator of National Life Insurance has limited its 10 percent stake to 1.11 percent. Sri Lanka’s Selingco Holdings Limited has limited its stake in non-life insurer Sagarmatha Lumbini Insurance to 11.4 percent from 20 percent.
MetLife Insurance, Oriental Insurance and National Insurance Company have been operating branch offices in Nepal without investing capital.
In order to expand the access of insurance to the underprivileged in Nepal, there is a need for foreign investment for information technology-based insurance services and expertise in reinsurance risk management.
