Insurance Laws Amendment Act in Force from 5 February 2026: The Operational Compliance Map for 100% FDI

Earlier coverage of the FDI liberalisation dealt with a bill at the proposal stage. That stage is over. The Insurance Laws (Sabka Bima Sabki Raksha) Amendment Act 2025 was passed by Parliament on 17 December 2025 (introduced and passed in the Lok Sabha on 16 December and passed by the Rajya Sabha on 17 December), received Presidential assent on 20 December 2025, and commenced for most provisions on 5 February 2026. It is now the operative law on foreign investment, ownership transfers and IRDAI's enforcement powers, so the questions have moved from whether to how to comply.

The headline change is that foreign direct investment in Indian insurance companies is raised from 74% to 100% under the automatic route. The supporting Indian Insurance Companies (Foreign Investment) Amendment Rules took effect from 30 December 2025, setting the conditions a foreign-invested insurer must satisfy. So both the primary Act and the rules that operationalise it are live, making this a compliance map, not a market-outlook piece.

The move from 74% to 100% on the automatic route is more than numerical. Under the earlier regime a foreign promoter could hold a majority but not the whole of an Indian insurer, which forced joint-venture structures and the complications of shared control. At 100% on the automatic route, a foreign insurer can, subject to the conditions and IRDAI's framework, own an Indian insurance company outright without the prior government approval a non-automatic route would require, which changes the calculus for foreign entry, the buy-out of joint-venture partners, and new applications.

The higher ceiling comes with conditions designed to keep substantive control anchored in India even where ownership is fully foreign.

Resident chair or chief executive

An Indian insurance company with foreign investment must have a resident Indian as its chairperson, managing director or chief executive officer, keeping the person at the head of the company resident and accountable within the Indian system regardless of the foreign ownership above. For a foreign entrant or buyer, this is a board-composition requirement to satisfy at the point of structuring, not retrofit later.

IRDAI prior approval for transfers above 5%

The framework requires IRDAI prior approval for transfers of shareholding above 5%: a transfer across the threshold cannot simply complete and be notified; it needs prior approval. For M&A, secondary-share sales and cap-table changes, this is a transaction-planning condition, so a deal that moves shareholding above the threshold has to build the IRDAI approval into its conditions precedent and timeline, and treating approval as a formality risks stalling at the gate.

The Foreign Investment Amendment Rules carry the operating conditions for a foreign-invested insurer, historically including the board and key management persons being resident and governance and solvency expectations. The conditions, effective from 30 December 2025, are the operative detail an entrant or acquirer maps its structure against, read in full against the specific transaction.

The Act grants IRDAI enhanced powers including the power to order disgorgement of wrongful gains. Disgorgement is distinct from a penalty: a penalty punishes, while disgorgement strips a wrongdoer of the gain it made from the wrongful conduct. A regulated entity or person that profits from a contravention can now be ordered to give up that profit, which changes the economics of non-compliance and is a reason for anyone within IRDAI's jurisdiction to take conduct and disclosure obligations more seriously.

The insurance read-through is the familiar one. A disgorgement order, like a penalty, is a regulatory consequence of wrongful conduct, and as a general matter such sums are not the kind of liability a liability policy is designed to indemnify, because they strip or punish the wrongdoer's own conduct rather than compensate a third party. What a directors and officers or management-liability programme can address around an IRDAI enforcement action is the defence and representation cost of the proceeding, subject to its terms, not the disgorgement or penalty itself, so a board should manage conduct risk through compliance rather than assuming insurance will absorb a disgorgement.

The Act also provides for higher penalties and a broader enforcement reach, raising the financial stakes of contraventions. The increased penalty and disgorgement exposure is managed by compliance, and insurance is relevant to the defence and representation cost and to genuinely compensatory third-party liability, not to the penalty or the disgorged gain. A foreign entrant new to the Indian regime should map its conduct and disclosure obligations against this strengthened enforcement posture from the outset, because the regulator's powers are wider than they were.

Ownership and control

Under the 74% regime, a foreign promoter could hold up to 74% but not the whole, which in practice meant a continuing Indian shareholding and, frequently, a joint-venture structure with shared control. Under the 100% automatic-route regime, a foreign insurer can own the company outright, subject to the conditions, without the prior government approval a non-automatic route would require. The clearest effect is on existing joint ventures: a foreign partner can now buy out the Indian partner's residual stake, and a new entrant can apply without needing an Indian joint-venture partner. The transfer above 5% still needs IRDAI prior approval, so the buy-out is a regulated transaction, but the ownership ceiling no longer forces the shared structure.

Governance

Under the old regime the control conditions sat alongside the cap. Under the new regime the cap is gone but the governance anchor remains explicit: the resident chair or chief executive condition keeps the head of the company resident and accountable in India even at 100% foreign ownership. The liberalisation is of ownership, not of the requirement that substantive leadership be anchored domestically.

On enforcement, under the old regime IRDAI's toolkit did not include the disgorgement power. Under the new regime it has the disgorgement power and higher penalties, so a foreign entrant arriving at 100% ownership is arriving under a stronger enforcement regime than governed entrants under the 74% cap, a part of the change that ownership-focused commentary can miss.

The net picture is a liberalisation of ownership paired with a retained domestic-governance anchor and a strengthened enforcement posture: full ownership without a forced joint venture, against a resident head, an IRDAI approval gate on significant transfers, and a regulator with broader powers.

The commencement turns the reform into concrete tasks. Foreign entrants and acquirers should structure to the conditions from the outset (build the resident chair or chief executive into the board plan, and map the Foreign Investment Amendment Rules against the proposed structure before filing), build the IRDAI approval gate for any transfer above 5% into the transaction, and map conduct obligations against the strengthened enforcement posture from entry. For M&A and existing joint ventures, shareholder agreements, put and call options and pre-emption rights now operate against a regime where the foreign partner can hold 100%, which changes the bargaining position for a buy-out, and the transfer-approval gate above 5% governs how any such move is executed and paced.

Broker firms

The broker-firm position is distinct from the insurer FDI position. Foreign investment in insurance intermediaries operates under its own framework, addressed in dedicated coverage of FDI for intermediaries. For a broker firm, the points are to understand which FDI framework governs its own ownership, to expect more foreign-owned insurer counterparties and the consolidation full-ownership entry tends to bring, and to keep its own ownership compliance current.

The liability and D&O read-through

For the boards of regulated entities under the new regime, the strengthened enforcement posture raises the regulatory-exposure side of the directors and officers and management-liability programme. The cover is relevant to the defence and representation cost of an IRDAI proceeding and to compensatory third-party liability, not to a disgorgement order or a penalty, so a foreign entrant should size its D&O and management-liability programme to the realistic cost of defending a regulatory action under this stronger regime.

Getting that right means comparing what each D&O and management-liability wording grants against the enforcement exposure the Amendment Act creates, which is detailed wording work, not a premium comparison. Sarvada gives commercial insurance brokers and corporate risk teams structured, searchable access to insurer policy wordings and the intelligence around them, so D&O and management-liability covers can be matched to the regulatory-exposure profile a 100% foreign-owned insurer carries under the Amendment Act. Request Access to bring that precision to your clients' regulatory-risk conversations.