The proposal from the Finance Ministry is to increase the Foreign Direct Investment (FDI) limit in insurance firms to 100%. This is expected to have a positive impact on the sector by promoting competition.

Additionally, the minimum net-owned funds requirement for foreign re-insurers is set to be reduced from Rs 5,000 crore to Rs 1,000 crore, making it easier for international players to enter the market. The Insurance Regulatory and Development Authority of India (IRDAI) will also have the power to establish lower capital requirements, starting at Rs 50 crore, for companies operating in under-served areas on a case-by-case basis.

These changes are aimed at prioritizing the interests of policyholders, improving financial security, and stimulating economic growth and employment in the insurance industry.