The Indian insurance regulatory landscape is undergoing its most significant transformation in decades. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, notified on December 21, 2025, and effective from February 5, 2026, marks a watershed moment for the sector.
Key Legislative Changes
100% FDI in Insurance
The amendment raises the FDI limit in Indian insurance companies from 74% to 100%. This landmark decision is expected to attract stable long-term investment, facilitate technology transfer, and support greater insurance penetration.
Enhanced Policyholder Protection
IRDAI has been empowered to order disgorgement of wrongful gains made by insurers or intermediaries. The maximum penalty for non-compliance has been enhanced from Rs 1 crore to Rs 10 crore.
Risk-Based Capital Framework
Perhaps the most consequential market-moving shift in 2026 is the introduction of the risk-based capital (RBC) framework, which changes the economics of insurance — rewriting how insurers price risk, report profit, and use capital.
Sources: PIB India, IRDAI Official Release (March 2026), FE BFSI Analysis (May 2026)