Thursday 08 / January / 2026
New Delhi: As the year 2025 comes to a wrap, the insurance industry leaders bid farewell to the eventful year, calling it an inflection point mirroring broader resilience with the wider economy and are set to welcome the New Year 2026 with a bullish outlook.
In 2025, India's insurance sector saw major shifts with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025 enabling 100% FDI, fostering competition, alongside tech booms in Artificial Intelligence/Machine Learning (AI/ML) for underwriting & claims, a surge in digital policy issuance, new products like usage-based & embedded insurance, and a significant push for enhanced regulatory governance and financial inclusion, driving massive capital inflow and market growth.
The bill also lowers the net-owned fund requirement for foreign reinsurers to ₹1,000 crore from ~$555m (₹5,000 crore), reducing entry barriers for international and specialised reinsurance players.
According to CareEdge Ratings, the move will ease capital constraints for insurers as solvency requirements rise and could support consolidation in the sector.
Out of around 60 insurers and reinsurers operating in India, six smaller players are already close to the earlier foreign ownership ceiling of 70% to 74%.
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For these companies, the higher cap allows further capital infusion by existing foreign promoters without changing ownership structures. CareEdge said this could increase competition and expand reinsurance capacity in the domestic market, with the required capital remaining within India to support local insurers.
Regulatory flexibility has been extended to insurers operating in Special Economic Zones (SEZs) and International Financial Services Centres (IFSCs) within SEZs.
This allows the central government to tailor insurance regulations for these zones, supporting cross-border insurance activity and the development of IFSCs as regional insurance hubs.
Another key change removes the mandatory minimum paid-up capital requirement of ~$11.1m (₹100 crore) for insurance cooperative societies.
The government said this is intended to encourage community-based insurance models, particularly in agriculture, dairy and regional clusters, and improve financial inclusion in underserved areas.
According to Sanjay Agarwal, Senior Director at CareEdge Ratings, the reforms strengthen the insurance framework by improving access to capital, enhancing regulatory oversight and easing operational bottlenecks.
He said the higher FDI limit provides headroom for incremental capital infusion, supporting growth and solvency, and is likely to improve insurance penetration and market resilience over time.
However, CareEdge noted that several proposed reforms, including composite licences, relaxed capital norms for new insurers, captive insurance, broader distribution architecture and changes to investment norms, are not part of the current bill and may be considered in the future.
