Why in News?
The Lok Sabha passed the Sabka Bima Sabka Raksha Bill (Amendment of Insurance Laws) Bill, 2025, raising the Foreign Direct Investment (FDI) limit in the insurance sector from 74% to 100% to boost capital inflow, competition, insurance penetration, and technology adoption.
Description:
1. Key Structural Reforms:
- 100% FDI: Raises the Foreign Direct Investment (FDI) limit in Indian insurance companies from 74% to 100%.
- Net Owned Funds (NOF): Reduced requirement for foreign reinsurers from ₹5,000 crore to ₹1,000 crore to boost reinsurance capacity.
- One-Time Registration: Intermediaries will now have a one-time registration system, removing the need for repeated approvals.
- Equity Transfer Threshold: The limit for requiring IRDAI approval for transfer of paid-up equity capital increased from 1% to 5%.
2. Operational Freedom & Expansion:
- LIC Autonomy: Life Insurance Corporation of India (LIC) can now set up new zonal offices without prior government approval.
- Agent Multiplicity: Allows individual insurance agents to sell products from multiple companies, ending the previous restriction to one life and one general insurer.
- Merger Provision: Paves the way for the merger of a non-insurance company with an insurance company.
3. Critical Omissions:
- No Composite Licenses: Insurers still cannot sell both life and non-life products under a single license.
- No Capital Requirement Reduction: The minimum paid-up capital remains ₹100 crore for insurers and ₹200 crore for reinsurers.
- No Captive Insurers: Proposals to allow large corporations to establish captive insurance entities were deferred.
Key Terms:
- Insurance penetration: Insurance penetration in India refers to the ratio of total insurance premiums collected in a given year to the country’s Gross Domestic Product (GDP), expressed as a percentage.
- Net Owned Funds: Net Owned Funds means the aggregate of paid-up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet.
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