Parliamentary proceedings: Raising FDI limit for insurers to 100% will generate employment opportunities, says FM Sitharaman
Further, she said, "improved technologies and automation would lead to faster underwriting, claim processing leading to improved turnaround time thereby reducing cost and enhancing overall efficiency of the sector." The increase in FDI in Indian insurance companies from 74% to 100% was announced in the Union Budget on February 1, 2025.
Parliament Monsoon Session Day 17 updates
The Insurance Act, 1938 governs investment by insurers with a strong emphasis on safety, liquidity, and regulatory oversight by aligning investment by insurers with policyholder interests.
The Act stipulates time, manner, form, conditions and instruments allowed for investment. Insurers are mandated to invest a specified percentage of funds in government securities and other approved securities as specified by Insurance Regulatory and Development Authority of India (IRDAI).
"Additionally, the Act does not permit Indian insurance companies to invest any of their funds outside India. Hence, all the funds of insurance companies must be compulsorily invested in India," she said in a reply in the Rajya Sabha.
In order to ensure financial stability in the insurance sector and protection of policyholders, she said, the Act further mandates every insurer to maintain at all times, an excess of assets over liabilities of not less than 50% of the minimum capital amount.
Irdai further mandates insurers to maintain the control level of solvency of 150% at all times, she said.
Further, in case of an insurer acting in a manner prejudicial to the policyholders' interests, Irdai is empowered by the Act to supersede the Board of such insurance company and appoint an Administrator to manage the affairs of the insurance company.
Besides, she said, the regulatory oversight of the Irdai ensures transparency and policyholder protection by promoting fair business practices, solvency monitoring, supervision and efficient grievance redressal.
As per the Companies Act, 2013, all insurance companies are board- governed entities and are required to be compliant with the Companies Act, 2013 at all times for all governance matters.
This, alongside Indian Insurance Companies (Foreign investment) Rules, 2015 governs various aspects of operations including dividend payment, repatriation of profit and composition of Board of Directors for insurance companies.
"All these provisions and mechanisms ensure adequate checks and balances for conduct of business of insurance in India and act as safeguards," she said.
Replying to another question, Sitharaman said the maximum continuous tenure of directors of cooperative banks (excluding Chairperson and Whole-time Directors) has been extended from 8 to 10 years following the recent amendment in Section 10A (sub section 2a (i)) of the Banking Regulation Act 1949 (BR Act).
This provision has come into effect from August 1, 2025, she added.
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