Insurance Newsletter: Quarterly Updates For January To March 2026

The first quarter of 2026 witnessed significant regulatory developments in India's insurance sector, characterised by foreign investment liberalisation, modernisation and enhanced consumer protection. Most notably, the Government of India’s decision to increase the foreign direct investment (FDI) limit in the insurance sector to 100% represents a transformative shift. For international stakeholders, this signals a significantly enhanced opportunity to participate in one of the world’s fastest-growing insurance markets.

In this edition, we analyse the key regulatory updates in the insurance sector during January to March of this year, including industry discussions and a notable order passed by the Insurance Regulatory and Development Authority of India (“IRDAI”).

A. FDI in Insurance Sector increased to 100%

In light of the increase in the foreign investment limit in the insurance sector from 74% to 100% [1]  (for more details, please see our update), the Department for Promotion of Industry and Internal Trade issued Press Note 1 (2026 Series) (“Press Note”) to reflect this change in the Consolidated FDI Policy of 2020. Now, foreign direct investments (“FDI”) up to 100% of the paid-up equity capital of insurance companies have been permitted under the automatic route. 

Certain additional changes have been prescribed under the Press Note in line with the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025. Some of these key changes are set out below:

• For Indian insurance companies having foreign investment, at least one amongst these shall be an Indian citizen - Chairperson of its board, Managing Director and its Chief Executive Officer. 
• The requirement for insurance companies having FDI to have a majority of its board and key management persons as resident Indian citizens has been removed. 

We would also highlight that the previous requirement under the Indian Insurance Companies (Foreign Investment) Rules, 2015, for insurance companies with FDI in excess of 49% to appoint at least half of its board as independent directors where the chairperson is not an independent director, has been removed. Additionally, insurance companies having FDI exceeding 49% are no longer required to retain 50% of their net profits in general reserves even if their solvency margin is less than 1.2 times the control level of solvency and if dividend has been paid on equity shares during that financial year.

• Insurance intermediaries having majority shareholding of foreign investors are no longer required to take prior permission from the IRDAI for repatriating dividends.

These reforms are expected to provide greater flexibility to foreign investors to structure their investments in insurance companies and thereby, catalyse fresh capital infusion in the Indian insurance sector. 

B. Relaxations for Overseas Insurers under IRDAI’s new guidelines on establishment and closure of Liaison Offices 

The IRDAI has issued “Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India” on February 11, 2026 (“New Guidelines”) superseding the earlier guidelines issued on October 17, 2022 (“Erstwhile Guidelines”). While the New Guidelines are substantially the same as the Erstwhile Guidelines, some of the key changes are as follows:

• Exceptions to Eligibility Norms: The IRDAI may now, in exceptional cases, after considering bilateral trade significance and scope for market development, relax the minimum net worth requirement of at least USD 65 million for opening a liaison office in India. The situations in which this relaxation may be granted is when the overseas insurer is a: (a) foreign state-owned enterprise; (ii) reinsurer with strong credit ratings or demonstrated expertise; or (iii) specialized insurer.
• Extension of approval for longer duration: Under the Erstwhile Guidelines, the validity of the approval granted by the IRDAI for opening a liaison office was for three years beyond which the overseas insurer could apply for an extension of another year. This extension can now be sought by overseas insurers for three years instead of the earlier one-year time period.
• Continuation beyond 3+3 years’ period: Overseas insurers were mandatorily required to close their liaison office within 6 months from the expiry of the one-year extension period under the Erstwhile Guidelines. The New Guidelines now permit an additional extension to overseas insurers to operate a liaison office in addition to the three-year extension period after the initial approval for 3 years. Such extension may be granted by the IRDAI on a case-to-case basis in exceptional cases where there is a clear strategic importance or bilateral trade significance, amongst others. 

These changes are significant for overseas insurers as these relaxations enable a wider pool of insurers to establish a liaison office in India. Additionally, liaison offices can now be set up for longer periods of time therefore providing more flexibility to foreign insurers.

C. Transition to perpetual registration for Insurance Intermediaries

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“Amendment Act”) amended Section 42D of the Insurance Act, 1938 (“Insurance Act”), removing the provision on validity of registration of insurance intermediaries for a period of 3 years. The Amendment Act now provides for such registrations to remain in force on a continuous basis until the registration is suspended or cancelled by the IRDAI subject to payment of an annual fee (for more details, please see our update). 

D. Implementation of Indian Accounting Standards by Insurers

In light of the Indian Accounting Standards (“Ind AS”) converging with International Financial Reporting Standards (IFRS) to align Indian financial reporting with global practices, the IRDAI recently issued the IRDAI (Actuarial, Finance and Investment Functions of Insurers), (Amendment) Regulations, 2026 (“AFI Amendment Regulations”) on March 30, 2026 after significant public consultation. Separately, the IRDAI issued a circular on March 31, 2026 setting out certain clarifications on the implementation of Ind AS.

Key changes introduced under the AFI Amendment Regulations are set out below:

• Preparation and presentation of financial statements by insurers is now required to be in accordance with applicable Ind AS, with effect from April 1, 2026, and such implementation will be applicable to all categories of insurers, including life, general, standalone health insurers, and reinsurers;
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• The AFI Amendment Regulations set out the regulatory framework governing the recognition, measurement, presentation and disclosure of financial statements under Ind AS;
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• It provides for parallel reporting for a period of two years, or such other period as may be specified by the IRDAI, comprising financial statements prepared in accordance with Ind AS alongside financial information under the existing accounting framework; and
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• For insurers facing challenges in immediately shifting to Ind AS, IRDAI may grant forbearance for a one-year period provided that an application is made prior to April 30, 2026. During this forberance period, such insurers shall continue to submit Ind AS based financial information to the IRDAI and a monthly progress report. 

These amendments represent a significant step towards modernising the financial reporting framework of the insurance sector in India. By aligning with globally accepted accounting standards, these amendments are expected to enhance transparency, credibility, and regulatory oversight.

E. Clarifications on investment by Insurers in Alternative Investment Funds

The IRDAI issued certain clarifications on February 12, 2026, with respect to investments by insurers in alternative investment funds (“AIFs”). Insurers are allowed to invest in AIFs and funds of funds (“FoFs”) as per IRDAI’s Master Circular on Actuarial, Finance and Investment Functions of Insurers dated May 17, 2024 (“Master Circular”). However, investments in FOFs need to comply with Section 27E of the Insurance Act which prohibits insurers from investing policyholder funds outside India, whether directly or indirectly. The Master Circular also mandates the insertion of a clause in the fund offer documents of FoFs restraining them from investing in AIFs which invest in overseas companies or funds. 

The following clarifications, amongst others, have been issued by the IRDAI in the above context for compliance with the conditions under the Master Circular:

• The insurer must make investments in AIFs with excusal rights (i.e. the AIF excusing the insurer from participating in certain specified investments) as per SEBI guidelines and the proceeds of the insurer’s investments should not be invested outside India by such AIFs;
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• Insurers must provide a formal declaration citing Section 27E of the Insurance Act as the reason for the inability of the insurer to participate in the AIF’s overseas investment;
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• A clause must be inserted in the private placement memorandum stating that the capital received from the insurer shall not be drawn down, utilized or pledged for any investment outside India; and
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• The AIF’s statutory auditor must confirm that the insurer’s capital has not been invested outside India.

Additionally, under the Master Circular, insurers were not permitted to invest in AIFs that have an exposure to a FoF in which the insurer already has an exposure. The IRDAI has now removed this provision and clarified that insurers must ensure compliance with the single AIF exposure limit in respect of their direct and indirect exposure (through FoFs) into an AIF.

A. Registration granted to two new insurance entities

The IRDAI approved the grant of certificate of registration to two insurance entities at its meeting on March 09, 2026. The approval was granted to a reinsurer, Allianz Jio Reinsurance Limited (“AJ Re”), and one general insurer, Kiwi General Insurance Limited (“KGIL”). Consequently, the total number of general insurers in the country has increased to 28 and the total number of domestic reinsurers has increased to 3.

AJ Re has been established as a joint venture in a 50:50 ratio between Jio Financial Services Limited and Allianz Europe B.V. to act as a domestic reinsurer in India. The general insurer KGIL has been established as a joint venture between West Bridge Capital (a private equity firm) and Neelesh Garg (former CEO of an Indian insurer). 

B. Industry discussion on Public Insurance Registry and Bima Sugam

The IRDAI convened an industry stakeholders’ discussion wherein it discussed and deliberated on the vision and implementation of a digital public insurance infrastructure in the form of a Public Insurance Registry (“PIR”). The PIR is envisioned as an interoperable information infrastructure to consolidate insurance data across stakeholders and cover the entire insurance policy lifecycle right from issuance of policy to claim settlement and grievance redressal. This is expected to enhance accountability and transparency through reduction of information asymmetry and data-driven regulatory oversight. 

The above discussion also featured a session on Bima Sugam and its role in transforming insurance accessibility across India. Bima Sugam is a digital public infrastructure with its primary function being creation of efficient and effective end-to-end digital solutions in meeting the requirements of insurance stakeholders (such as consumers, insurers, intermediaries or insurance intermediaries and insurance agents) and the market it serves.

A. IRDAI order in the matter of Wealthkart Insurance Broking Private Limited

The IRDAI passed an order in the matter of Wealthkart Insurance Broking Private Limited (“Wealthkart”) on January 22, 2026. Key observations under the aforementioned IRDAI order are set out below:

• Charge: Wealthkart effected changes in its shareholding pattern pursuant to an internal restructuring among existing promoters, with no impact on the overall control or management and without introduction of any new shareholders or external entities as shareholders. These transfers were beyond the prescribed thresholds under Regulation 25(2) read with Schedule II - Form T of the IRDAI (Insurance Brokers) Regulations, 2018 (“Broker Regulations”), therefore requiring prior IRDAI approval. 

Decision: The IRDAI held that the prior approval requirement is statutory in nature and cannot be dispensed with on the basis of subjective assessment by the regulated entity, irrespective of whether such transfers are internal or external in nature. Accordingly, the IRDAI imposed a penalty of INR 1 Crore on Wealthkart for the violation.

• Charge: Regulation 22(1) of the Broker Regulations stipulates that the net worth of an insurance broker shall, at no time during the validity of the certificate of registration, fall below INR 50 Lakhs in case of a direct insurance broker. It was observed that Wealthkart’s net worth remained below INR 50 Lakhs during multiple periods, which Wealthkart attributed to unexpected operational losses, expansion-related expenses and market fluctuations.  

Decision: Considering the nature of the lapse, the submissions made by Wealthkart, and the corrective steps initiated, the IRDAI issued a warning to Wealthkart for this violation.