Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 Receives Presidential Assent

Act No. 40 of 2025, Dated: 20.12.2025

1. Legislative Milestone

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 received the President’s assent on December 20, 2025, marking a significant reform in India’s insurance regulatory framework. The Act represents a major step towards liberalisation, expansion of insurance coverage, and strengthening of the insurance ecosystem.

2. Statutes Amended

The Act amends the following key legislations governing the insurance sector in India:

• Insurance Act, 1938
• Life Insurance Corporation Act, 1956
• Insurance Regulatory and Development Authority Act, 1999

By amending these foundational laws, the Act creates a unified and modernised legal framework to support the evolving needs of the insurance market.

3. Foreign Investment Liberalisation

3.1 Increase in FDI Limit

A central feature of the Act is the liberalisation of foreign investment norms in the insurance sector.

• Foreign investment, including Foreign Direct Investment (FDI), is permitted up to 100%
• The limit applies to the paid-up equity capital of Indian insurance companies
• The enhanced cap is subject to prescribed conditions, safeguards, and regulatory oversight

This marks a departure from the earlier capped regime and places India among jurisdictions with fully open insurance markets, subject to regulatory controls.

4. Regulatory Safeguards

While allowing 100% foreign investment, the Act envisages that:

• Conditions relating to ownership, control, governance, and management will be prescribed
• Regulatory oversight will continue to ensure:

1. 1. Protection of policyholders’ interests
   2. Financial stability and solvency of insurers
   3. Compliance with prudential and conduct norms

This ensures that liberalisation does not dilute consumer protection or systemic stability.

5. Policy Objectives

The amendments seek to:

• Attract long-term foreign capital into the insurance sector
• Enhance insurance penetration and density
• Improve competition, product innovation, and service quality
• Strengthen the financial capacity and solvency of insurers
• Support the vision of “Sabka Bima, Sabki Raksha” by expanding access to insurance across all sections of society

6. Implications for the Insurance Sector

6.1 For Insurers

• Greater flexibility in capital structuring
• Access to global expertise, technology, and best practices
• Opportunities for consolidation, expansion, and innovation

6.2 For Investors

• Entry into a large and under-penetrated insurance market
• Full ownership possibilities, subject to regulatory conditions

6.3 For Policyholders

Potential benefits from:

• Wider product offerings
• Improved service standards
• Stronger and better-capitalised insurers

7. Next Steps

The operational impact of the Act will unfold through:

• Rules, regulations, and guidelines prescribing conditions for 100% foreign investment
• Transitional provisions for existing insurers and shareholders
• Regulatory clarifications on governance and control requirements

8. Key Takeaway

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 ushers in a transformative phase for India’s insurance sector by permitting up to 100% foreign investment, modernising core insurance laws, and strengthening the foundation for wider coverage, deeper capital markets, and enhanced policyholder protection.

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