Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, introduced in Lok Sabha on December 16, 2025, and swiftly passed by Rajya Sabha the next day, represents a landmark liberalization of India’s insurance sector. The Bill received Presidential assent on 20 December 2025 and thereby Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“Act”) was published for general information in the Gazette of India on 21 December 2025.
The Act amends the following existing legislations
- Chapter II of Insurance Act, 1938;
- Chapter III of Life Insurance Corporation Act, 1956;
- Chapter IV of Insurance Regulatory and Development Authority Act, 1999.
Key Aspects of the Act:
Major Liberalizations: Foreign direct investment (“FDI”) in insurers rises to 100% of the paid-up capital under the automatic route, up from 74%. Subsequent to the notification of the Act, the Ministry of Finance has notified amendments to the Companies (Foreign Investment) Rules, 2015 to effect this change in FDI limit. Along with the change in FDI, the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025 (FI Rules”) published by the Ministry of Finance, modifies the governance norms for insurers by mandating that at least one among the Chief Executive Officer (“CEO”), Managing Director (“MD”) or Chairperson of the board must be a resident Indian citizen. The earlier requirement was that the majority of the board must be resident directors or key managerial persons.
Net-own funds for foreign reinsurers: Section 6 of the Insurance Act, 1938 was amended to state that for the registration of an Insurer it shall have net owned funds of not less than Rs. 1,000 crores. Prior to the amendment, the net-owned fund requirement was Rs. 5,000 crores.
Registration of transfer of shares: Previously, an approval was required from Insurance Regulatory and Development Authority of India (“IRDAI”) for registration of transfer of shares exceeding 1% of a public company in the insurance business was required. The Act increased the threshold for the same from 1% to 5%.
Merger and Amalgamations: Post-enactment of the Act, insurance businesses may be transferred or amalgamated with non-insurance companies upon obtaining IRDAI approval. This represents a notable shift from the earlier framework, which restricted such schemes to insurers alone, subject to IRDAI approval.
Increase in powers of IRDAI: The Act empowers IRDAI to supersede the Board of Directors of an insurer to appoint an Administrator when it has reason to believe that an insurer carrying on insurance business is acting in a manner likely to be prejudicial to the interest of its policyholders. Further, IRDAI has been empowered to prescribe the cap or specific limits and modalities for commissions, remuneration and rewards to agents and intermediaries.
Insurance Intermediary: Subsequent to the amendment, intermediaries will now receive registrations that remain valid until suspended or cancelled, which previously were valid only for a period of 3 years from the date of registration.
Provisions focusing on Consumer and Governance interests:
The amendment empowers the government to set up a dedicated Policyholders’ Education and Protection Fund. This fund is intended to promote insurance literacy and strengthen consumer education ensuring informed consumers and policyholders.
Our Thoughts:
The Amending Act marks a decisive step toward the Government’s long-term goal of “Insurance for All by 2047.” Relaxing regulatory norms and permitting 100% FDI enhances consumer options by fostering robust competition among existing insurers. This shift also creates new channels for securing foreign investment, bolstering companies’ growth prospects and financial resilience. Although consumer safeguards remain firmly in place, the bolstered regulatory structure demonstrates a thoughtful equilibrium between liberalization and oversight. Simplified governance norms grant insurance firms greater operational flexibility, streamlining compliance and spurring efficiency.
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