As per the Consolidated FDI Policy, 2013 FDI in Insurance Sector is permitted up to 26% under the automatic route, subject to two conditions, namely:

1. Insurance Act, 1938 permits FDI in insurance sector under automatic route.
2. The overseas companies bringing FDI in insurance sector obtains the required license from Insurance Regulatory & Development Authority (‘IRDA’).

On 4^th February, 2014, DIPP vide Press Note 2 (2014 Series) has permitted investment by FIIs and NRIs within the limit of 26 % in the Indian Insurance sector under automatic route. The government has also clarified that for the purpose of sectoral caps under FDI Policy Insurance sector includes the following:

The following additional conditions have been imposed for permitting FDI up to 26% (FDI, FII and NRI) in the Insurance sector under automatic route:

1. The provisions relating to ‘Banking-Private Sector’ shall apply to bank promoted insurance companies as contained in DIPP consolidated Policy, 2013 under Para 6.2.17.2.2(4) (i) (c) (e), which are:

a)	Applications for FDI in private banks having JV or subsidiary in insurance sector, to be made to RBI for consideration, in consultation with IRDA.
b)	All the policies and procedures prescribed by RBI and other institutions such as SEBI, DCA and IRDA in respect of these matters shall be applicable.

2. An Insurance Company has been defined as:

a)	A company formed and registered under the Companies Act, 1956.
b)	A company in which aggregate equity holding by a foreign company (along with its subsidiary and nominee companies) does not exceed 26% of its paid-up equity capital.
c)	A company carrying on sole business of life insurance or re-insurance.

3. Insurance broker means a person holding a license under Regulation 11 of IRDA (Insurance Broker) Regulations, 2002 who arranges for insurance contract with insurance or re-insurance companies on behalf of his clients.
4. TPA means a third party administrator holding a license from IRDA under IRDA (health service) regulations, 2001 and is engaged in the agreement with insurance company for health services.
5. Surveyors and loss assessors will be governed by IRDA Insurance Surveyors and Loss Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000.

1. The existing foreign equity holders in the Insurance Sector will have additional exit opportunities as they now have the option to sell their holdings to FIIs and NRIs.
2. The Insurance Companies will have new avenues for raising funds from FIIs and NRIs.