Composite licensing still on hold even as govt approves 100% FDI in insurance

Cabinet approves 100% FDI in insurance

The Centre on December 12 has moved ahead with only one piece of its long-discussed insurance reform package -- raising FDI to 100 percent -- while leaving other proposals from the Insurance Amendment Bill, including composite licensing, waiting in the wings.

The Union Cabinet, chaired by Prime Minister Narendra Modi, on December 12 approved the Insurance Amendment Bill, giving the green light for full foreign ownership in Indian insurance companies from the earlier 74 percent.

The decision confirms Moneycontrol’s earlier reporting that the government was preparing to push through an FDI hike in the Winter Session.

By lifting the FDI cap, the government is looking to draw substantial long-term foreign capital into the sector.

Officials said the move will help insurers strengthen their balance sheets, improve solvency levels, and expand coverage in a country where insurance penetration remains low.

Full foreign ownership is also expected to sharpen competition, improve product innovation, and potentially lower costs for policyholders, according to the government.

However, other major reforms that had been part of the broader legislative revamp of the Insurance Amendment Bill, such as composite licences (allowing a single entity to sell life, general and health products), lower minimum capital requirements for select categories, and easier entry norms for specialised players have not been taken up.

As Moneycontrol reported earlier, these proposals were under active examination but were unlikely to make it to the final draft immediately. That expectation held true, with the Cabinet choosing to clear only the FDI component for now.

The decision fits into the government’s wider push to modernise financial services and attract global investment. The Finance Ministry had earlier indicated its intent to introduce a comprehensive reform bill during the Winter Session, with the FDI hike forming a key part of the package.

With the Cabinet’s approval now secured, the Insurance Amendment Bill will be introduced in Parliament for debate and passage. Once enacted, the FDI reform alone is expected to usher in a new phase of capital-driven expansion in the industry.