Stocks of insurance companies witnessed strong buying on Friday after the Ministry of Finance proposed to raise the foreign direct investment (FDI) limit in this sector from 74% to 100%.

LIC shares rose by 5.28% on the NSE during intraday trade today, reaching ₹988, up from the previous close of ₹938.60. LIC stock has gained 43% over the past 12 months and 17% year-to-date. Similarly, New India Assurance (NIACL) shares surged by 3.74% to ₹200.90, compared to the previous close of ₹193.66. This contrasted with a 0.39% gain in the NSE Nifty 50. Go Digit shares also rose by 1.53% to ₹341.70 on the NSE from the previous close of ₹336.55.

Following a comprehensive review with IRDAI and the industry, the Department of Financial Services released a proposal on November 26. The Centre plans to amend the FDI limit in the country’s insurance companies, raising this limit from 74% to 100%, allowing insurers to handle multiple classes of insurance business and insurance activities

The government also plans to reduce the net owned funds requirement for foreign re-insurers from ₹5,000 crore to ₹1,000 crore. Net Owned Funds (NOF) for a foreign re-insurer is the minimum amount of capital or financial resources that the company must maintain to operate in India.

“It is proposed to amend certain provisions of Insurance laws to ensure accessibility and affordability of insurance to citizens, foster expansion and development of the insurance industry, and streamline business processes,” the letter said.

“The proposed amendments primarily focus on promoting policyholders' interests, enhancing the financial security of the policyholders, facilitating entry of more players in insurance market leading to economic growth and employment generation, enhancing efficiencies of the insurance industry, enabling ease of doing business and enhancing insurance penetration to achieve goal of ‘Insurance for All by 2047’,” the letter added.

The government has invited comments on proposed amendments to the Insurance Act, LIC Act, and IRDA Act until December 12.

Additionally, the amendments also included the proposal for the IRDAI to set lower entry capital requirements (minimum ₹50 crore) for underserved or unserved segments on a case-by-case basis.