The central government on Saturday announced 100% foreign direct investment (FDI) in insurance companies under the automatic route, allowing full foreign ownership in the sector. The move is expected to increase foreign participation in India’s insurance industry. Foreign investment in Indian insurance companies and intermediaries will now be permitted up to 100% of the paid-up equity capital, including investments by portfolio investors.In a press note, the Finance Ministry said, “Foreign investment up to one hundred per cent of the total paid-up equity of an Indian insurance company will be permitted on the automatic route subject to approval and verification by the Insurance Regulatory and Development Authority of India.”This full foreign ownership will be allowed under the automatic route, but only after approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI).According to media reports, however, Life Insurance Corporation of India (LIC) will continue to follow a different rule, with foreign investment limited to 20% under the automatic route.In the note, the Department for Promotion of Industry and Internal Trade (DPIIT) said foreign investment, including portfolio investors, will now be allowed in domestic insurance companies under the automatic route. The new rules have been brought in line with the Sabka Bima Sabka Raksha (Amendment of Insurance Laws) Act, 2025. The Finance Ministry had earlier said that most parts of the law, except Section 25, would come into effect from February 5.The change comes after the legislative approval of the Sabka Bima Sabki Raksha Bill, 2025, which was passed by Parliament in December 2025. The Bill paved the way for increasing the FDI limit in insurance from 74% to 100% under the automatic route.After receiving the assent of the President, the Bill becomes law, completing the legislative process required for implementation.Subsequently, in February 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry issued a notification allowing 100% FDI in the insurance sector, which has now been formalized by the Finance Ministry.However, inflows can be made under certain conditions: “The aggregate shareholding by way of foreign investment in equity shares of an Indian insurance company by foreign investors, including portfolio investors, is permitted up to one hundred per cent of the paid-up equity capital of such Indian insurance company,” the press note said.Insurance companies with foreign investment must ensure that at least one top role is the Chairman, Managing Director or Chief Executive Officer who is a resident Indian citizen.Any change in foreign ownership will also be required to comply with the pricing rules prescribed by the Reserve Bank of India under FEMA regulations.As per IRDAI rules, the 100% FDI limit will also apply to insurance intermediaries like brokers, reinsurance brokers, corporate agents, third party administrators, surveyors and loss assessors, managing general agents and insurance repositories.India had already allowed full foreign ownership in insurance intermediaries in 2020 and 20% FDI in LIC in 2022.Banks acting as insurance intermediaries will still comply with their core sector foreign investment rules, as long as their non-insurance income exceeds 50% of total revenues in a financial year. Majority foreign-owned companies in the sector will need to be set up as limited companies under the Companies Act, 2013.