How will the insurance FDI hike in Budget 2025 benefit the sector?

The increase in the FDI limit will bring in more capital, better know-how, and global best practices.

“Insurance for All by 2047” is a mission of the Insurance Regulatory and Development Authority of India (IRDAI) to increase the insurance penetration and cover in the country. The budget proposal of raising the foreign direct investment (FDI) limit from 74 percent to 100 percent is a step to achieve that ambitious target.

The Economic Survey 2025 stated that the Indian insurance sector has shown an upward trajectory. The survey noted that insurance received the highest FDI of 62 percent of the total equity FDI inflows to the services sector.

The enhanced FDI limit is likely to invite or attract a greater number of foreign players to enter the insurance market, which will also result in some sort of expansion of the insurance market.

The increase in the FDI limit will bring in more capital, better know-how, and global best practices. It will also trigger multiple transactions and M&A activity in the sector.

The listed private insurance players that are backed by banks may not see much change as private banks may not want to reduce their stake. A case in point is ICICI Lombard where ICICI Bank actually increased the stake in recent years to reach above 50 percent.

Among the private listed insurers, Niva Bupa will be a key beneficiary. Bupa, the global healthcare group, holds around 56 percent equity in Niva Bupa currently. The promoter Bupa group had acquired around 20 percent equity stake from Fettle Tone (True North) at the IPO/issue price of Rs 74 per share in January ’24.  Niva Bupa has been one of the first companies in India that benefitted from the increased FDI limit in insurance from 26 percent to 49 percent in 2014. The FDI limit of 100 percent in insurance will give the Bupa group a huge headroom to increase its stake in Niva Bupa. 

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