Increase in FDI limit in insurance sector to woo more foreign players: Moody's

Moody's Ratings predicts increased foreign investment in Indian insurance sector, boosting profitability and growth prospects post-Budget 2025-26.

Increasing foreign investment limit in the insurance sector to 100% from 74% is likely to attract more global players in the growing Indian insurance market, Moody's Ratings said on Tuesday (February 4, 2025).

Additionally, strong premium growth is expected to boost profitability of the sector.

Currently, many foreign insurers are present in the country through joint ventures and could seek to increase their ownership stakes in their Indian affiliates following this change in regulation.

"We view foreign investment as credit positive because it increases product innovation. The presence of foreign stakeholders also brings benefits in the areas of capital adequacy, financial flexibility and governance standards," Moody's Ratings said in a statement.

Presenting Budget 2025-26, Finance Minister Nirmala Sitharaman proposed to raise the foreign investment limit to 100% from 74% in the insurance sector as part of new-generation financial sector reforms.

Moreover, Moody's believes that the reduction in personal income tax will have positive trickle-down effects for the insurance sector.

"Increased levels of disposable income in the middle-class segment, the insurance sector's largest target market, bodes particularly well for health insurance, given increasing awareness around well-being and protection in the post-COVID era," it added.