Parliament passes the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025

On December 18, 2025, both Houses of Parliament adopted the Sabka Bima Sabki Raksha (Insurance for All, Protection for All) (Amendment of Insurance Laws) Bill, 2025, marking a transformative moment for India’s insurance sector. The President of India granted assent to the Sabka Bima Sabki Raksha (Insurance for All, Protection for All) (Amendment of Insurance Laws) Act, 2025 (Amendment Act) on December 20, 2025. The commencement date is yet to be notified by the Central Government.

1. Background and Purpose

The Government’s “Insurance 2.0” reforms aim to address structural constraints that have limited capital inflows, operational flexibility, and market innovation. The Amendment Act introduces extensive amendments to the Insurance Act, 1938 (Insurance Act), the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act). To give operational effect to this enhanced cap, consequential amendments will be required to be made to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, which must align the permissible foreign investment limits with the new 100% statutory ceiling.

2. Key Features of the Reform Package

The Amendment Act introduces some major reforms:

1. 1. 100% Foreign Direct Investment:

The Amendment Act permits 100% foreign investment in Indian insurers, up from the current 74% cap, subject to conditions to be prescribed. The Ministry of Finance, on December 30, 2025, notified the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025 (Amended Rules). The Amended Rules have substantially relaxed the erstwhile “Indian management and control” requirements, now mandating that only one amongst the Chief Executive Officer, Managing Director, or Chairperson be a Resident Indian Citizen.

1. 2. Reduced Share Transfer Approval Thresholds

The threshold for obtaining  Insurance Regulatory and Development Authority of India (IRDAI) approval for share transfers or issuances has been raised from 1% to 5%, materially reducing compliance friction for small ticket transactions and improving ease of doing business.

1. 3. Composite Licensing Framework

The Amendment Act defines “class of insurance business” to include life, general, health, reinsurance, or other classes notified by the Central Government. While not explicitly creating composite licenses, this provides the enabling framework for the Central Government to notify a composite insurance regime, allowing insurers to engage in multiple lines of insurance. This could enhance operational efficiency, reduce capital fragmentation, and align India with global best practices.

1. 4. Merger and Amalgamation Flexibility

The Amendment Act permits mergers of insurers with non-insurance companies into insurers, addressing historical regulatory headwinds. While the Amendment Act does not expressly address the permissibility of multi-step or composite merger structures (including transactions where an insurance business is temporarily combined with a non-insurer), the Notes on Clauses clarifies that the amendments are aimed at empowering IRDAI to approve a scheme of arrangement, including merger, demerger, reverse merger  between an insurer and a company not engaged in insurance business.

1. 5. Reduced Net owned Funds

The Amendment Act introduces several significant reforms to the regulatory framework governing Foreign Reinsurance Branches (FRBs) in India. Most notably, it substantially reduces the minimum Net Owned Fund requirement for an FRB from INR 50,000 million/ USD 551.27 million to INR 10,000 million/USD 110.91 million, thereby materially lowering the entry barrier for foreign reinsurers seeking to establish operations in India.

1. 6. Policyholder Protection

The Amendment Act establishes a Policyholders’ Education and Protection Fund to promote insurance awareness and safeguard policyholder interests. The Fund will be financed through grants, donations, and penalties collected by IRDAI, with its corpus comprising: (i) contributions from the Central Government, State Governments, IRDAI, companies, or other institutions; (ii) sums realized from penalties imposed by IRDAI under the Insurance Act, or the IRDAI Act, including associated rules and regulations; and (iii) any other amounts specified by IRDAI through regulations.

The Amendment Act introduces a comprehensive data governance framework by inserting Sections 14A, 14B, and 14C into the Insurance Act, which impose statutory duties on insurers, insurance intermediaries, and other regulated entities. IRDAI is empowered to direct the processing of Know Your Customer (KYC) data held by regulated entities, which must be deployed solely for regulatory compliance and operational purposes. Insurers and insurance intermediaries are statutorily mandated to maintain strict confidentiality of policyholder information and to implement safeguards against unauthorised access, use or disclosure.

Conclusion

The Amendment Act represents a paradigm shift for India’s insurance sector. By placing legally binding frameworks on foreign investment, composite licensing, and enhanced regulatory mechanisms, India is preparing a large-scale, market-driven insurance policy aligned with its “Insurance for All by 2047” vision.