IRDAI Order in the matter of M/s. Prowess Insurance Brokers Private Limited

IRDAI vide Order bearing reference number: IRDAl/BRK/ORD/MISC/101/07/2024 dated July 12, 2024, issued an Order in the matter of M/s. Prowess Insurance Brokers Private Limited (“ Prowess”) with respect to the Show Cause Notice dated February 29, 2024, issued by the Authority for the violation of the provisions of IRDAI (Insurance Brokers) Regulations, 2018 and IRDAI (International Financial Service Centre Insurance Intermediary Offices) Guidelines, 2019 (“ IFSCA Guidelines ”).

The observation/ issues raised by the Authority and decisions on these observations are summarized hereunder for reference:

Charge No

Violation

Observations of the Authority

Decision of the Authority

1

Violation of Regulation 2(f) and 13(1) of IRDAI (Insurance Brokers) Regulations, 2018

Reg. 2(f) –

“”Direct Broker” means an Insurance Broker, registered by the Authority, who for a remuneration and/or a fee, solicits and arranges insurance business for its clients with insurers located in India and/or provides claims consultancy, Risk Management services or other similar services, permitted under these regulations”

Reg. 13(1) –

“The Insurance Broker registered under these regulations shall act exclusively to carry on the business of an insurance Broker as permitted under these regulations”

Violation of Clause 11 and 15(b) of the IFSCA Guidelines

Clause 11

“The authorization granted by the Authority for the first time shall be valid till the expiry of the certificate of registration issued by the Authority and thereafter for a period co-terminus with the expiry of the original certificate of registration”

Clause 15(b)

“The renewal of authorisation shall be co-terminus with the period of certificate of registration of the insurance intermediary”

Prowess failed to conclusively establish that the services rendered were exclusively categorised as “Risk Management” services as per the Regulations, rather than being classified under Direct and Reinsurance Business Activities.

Prowess, operating as a Direct Broker, is exclusively permitted to conduct business transactions solely with insurers based in India and it is not authorised to undertake reinsurance operations due to its classification as a Direct Broker.

Prowess by engaging in transactions with Insurance brokers, insurance companies and reinsurance companies located abroad, violated the stipulations outlined in the Regulations

Prowess had conducted business activities from its Mumbai Office with insurance brokers, insurance companies and reinsurance companies located abroad and earned commission/remuneration. Prowess engaged in the abovementioned activities both prior to and post grant of approval for establishment of its IIIO

The Authority exercised the power vested under Section 102(b) of the Insurance Act, 1938 levied a penalty of Rs. 37,00,000/- for the violations.

The Authority has directed the Prowess to:

1. Remit the penalty of Rs. 37,00,000/- (Rupees Thirty-Seven Lakh only) within a period of 45 days from receipt of this Order.

2. An intimation for remittance may be sent to Mr. K. Mahipal Reddy, Chief General Manager (Intermediaries-Brokers).

3. This Order shall place before the Board of Prowess at its next immediate meeting so that the Board can take note of the violation and take necessary preventive steps to avoid such violations in future.

4. Prowess shall provide the copy of the minutes of the said meeting.

5. If the Prowess feels aggrieved by this Order, an appeal may be preferred to the Securities Appellate Tribunal, Mumbai as per the provisions of Section 110 of the Insurance Act, 1938.

A copy of the Order is attached for your ready reference.

Source category: IRDAI

Attachments

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