India’s cabinet has approved an increase of the Foreign Direct Investment (FDI) limit for insurance from 26% to 49%. Insurance companies will still have to be locally controlled.

Investment up to 26% will be automatically allowed, and investment between 26% and 49% will have to be approved by the Foreign Investment Promotion Board. The FDI limit for pension funds is also set to go up to 49%.

The change in the FDI cap, contained in the Insurance Laws Amendment Bill, will now go to Parliament for approval. Parliamentary approval of the change will galvanise the Indian insurance industry which is in need of capital.

Insurance penetration in India is very low (around 3%). With a population of more than 1.2 billion, there are hundreds of millions of uninsured or under-insured Indians. This presents significant opportunities for insurers around the world looking to invest in insurance in India.

India is a vast country that may be tricky to navigate, and insurers should seek the assistance of partners who know the local landscape. For further information on insurance in the region, have a look at our Singapore office’s note on insurance in Asia Pacific.