|THE GAZETTE OF INDIA|
PART III– Section 4
PUBLISHED BY AUTHORITY
No.230] NEW DELHI, THURSDAY, OCTOBER 17, 2002/ASVINA 25, 1924
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
New Delhi, the 16th October , 2002
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (INSURANCE BROKERS) REGULATIONS, 2002
F. No, IRDA/Reg/10/ 2002 —. In exercise of the powers conferred by section 114A of the Insurance Act, 1938 (4 of 1938) read with sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) the Authority in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely:-
Short title and commencement — (1) These regulations may be called the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002.
(2) They shall come into force on the date of their publication in the Official Gazette.
Definitions — (1) Unless the context otherwise requires, —
“Act” means the Insurance Act, 1938 (4 of 1938);
"Advisory Committee" means the Advisory Committee constituted under section 25 of the Insurance Regulatory and Development Authority Act (41 of 1999);
"Authority" means the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
"composite broker" means an insurance broker who for the time-being licensed by the Authority to act as such, for a remuneration, arranges insurance for his clients with insurance companies and/or reinsurance for his client/s;
"direct broker" means an insurance broker who for the time-being licensed by the Authority to act as such, for a remuneration carries out the functions as specified under regulation 3 either in the field of life insurance or general insurance or both on behalf of his clients;
"enquiry officer" means an officer of the Authority, or any other person having experience in insurance business, who is appointed by the Authority under regulation 37, to hold an enquiry against an insurance broker;
"form" means the forms specified under these regulations;
"inspecting authority" means one or more of its officers appointed by the Authority to discharge the functions stated in regulation 29;
"insurance broker" means a person for the time-being licensed by the Authority under regulation 11, who for a remuneration arranges insurance contracts with insurance companies and/ or reinsurance companies on behalf of his clients.
Explanation: The term “insurance broker” wherever it appears in these regulations shall be deemed to mean a direct broker, a reinsurance broker or a composite broker, as the case may be, unless expressly stated to the contrary;
an individual; or
a firm; or
a company formed under the Companies Act, 1956 (1 of 1956); or
a co-operative society registered under the Co-operative Societies Act, 1912 or under any law for the registration of co-operative societies; or
any other person recognized by the Authority to act as an insurance broker;
"principal officer" means — (i) proprietor, in the case of a proprietary concern; or (ii) a partner, in the case of a partnership firm; or
(iii) a director, who is responsible for the activities of the insurance broking in the case of a body corporate;
(iv) or the chief executive officer appointed exclusively to carryout the functions of an insurance broker;
"regulations" means Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002;
"reinsurance broker" means an insurance broker who, for a remuneration, arranges reinsurance for direct insurers with insurance and reinsurance companies.
Words and expressions used and not defined in these regulations but defined in the Insurance Act, 1938 (4 of 1938), or the Life Insurance Corporation Act, 1956 (31 of 1956) or the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), or Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) shall have the meanings respectively assigned to them in those Acts or the rules and regulations made thereunder, as the case may be.
3. Functions of a direct broker — The functions of a direct broker shall include any one or more of the following:
obtaining detailed information of the client's business and risk management philosophy;
(b) familiarising himself with the client's business and underwriting information so that this can be explained to an insurer and others;
rendering advice on appropriate insurance cover and terms;
maintaining detailed knowledge of available insurance markets, as may be applicable;
submitting quotation received from insurer/s for consideration of a client;
providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover;
acting promptly on instructions from a client and providing him written acknowledgements and progress reports;
assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938);
providing services related to insurance consultancy and risk management;
assisting in the negotiation of the claims; and
maintaining proper records of claims;
4. Functions of a re-insurance broker — The functions of a re-insurance broker shall include any one or more of the following:
familiarising himself with the client’s business and risk retention philosophy;
maintaining clear records of the insurer's business to assist the reinsurer(s) or others;
rendering advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets;
maintaining a database of available reinsurance markets, including solvency ratings of individual reinsurers;
rendering consultancy and risk management services for reinsurance;
selecting and recommending a reinsurer or a group of reinsurers;
negotiating with a reinsurer on the client’s behalf;
assisting in case of commutation of reinsurance contracts placed with them;
acting promptly on instructions from a client and providing it written acknowledgements and progress reports;
collecting and remitting premiums and claims within such time as agreed upon;
assisting in the negotiation and settlement of claims;
maintaining proper records of claims; and
exercising due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services.
Functions of composite broker — A composite broker shall carry out any one or more of the functions mentioned in regulations 3 and 4.
Application for grant of licence — (1) An application by a person for grant of a licence as an insurance broker shall be made in Form A to the Authority.
(2) The application under sub-regulation (1) shall be made for any one or more of the following categories, namely :
alongwith the requisite fees as specified in regulation 18.
7. Application to conform to the requirements — An application, not complete in all respects and not conforming to the instructions specified in the Form A and these regulations, shall be rejected.
Provided that, before rejecting any such application, the applicant shall be given a reasonable opportunity to complete the application in all respects and rectify the errors, if any.
8. Furnishing of information, clarification and personal representation — (1) The Authority may require an applicant to furnish any further information or clarification for the purpose of disposal of the application, and, thereafter, in regard to any other matter as may be deemed necessary by the Authority.
(2) The applicant or its principal officer shall, if so required, appear before the Authority for a personal representation in connection with an application.
9. Consideration of application — (1) The Authority while considering an application for grant of a licence shall take into account, all matters relevant to the carrying out of the functions by the insurance broker.
Without prejudice to the above, the Authority in particular, shall take into account the following, namely:-
whether the applicant is not suffering from any of the disqualifications specified under sub-section (5) of section 42 D of the Act;
whether the applicant has the necessary infrastructure, such as, adequate office space, equipment and trained manpower to effectively discharge his activities;
whether the applicant has in his employment a minimum of two persons who have the necessary qualifications specified in clause (F) below and experience to conduct the business of insurance broker;
whether any person, directly or indirectly connected with the applicant, has been refused in the past the grant of a licence by the Authority.
Explanation : — For the purposes of this sub-clause, the expression "directly or indirectly connected" means a relative in the case of an individual, and in the case of a firm or a company or a body corporate, an associate, a subsidiary, an interconnected undertaking or a group company of the applicant . It is hereby clarified that these terms shall have the same meanings as ascribed to them in the Companies Act, 1956 (1 of 1956) or MRTP Act, 1969 (54 of 1969), as the case may be.
(E ) whether the applicant fulfils the capital requirements as specified in regulation 10 and deposit requirements as specified in regulation 22;
(F) whether the principal officer of the applicant −
possesses the minimum qualification of :
Bachelors/ Masters degree in Arts, Science, or Social Sciences or Commerce or its equivalent from any institution/ university recognized by any State Government or the Central Government; or
Bachelor’s degree in engineering or its equivalent from any institution/ university recognized by any State government or the Central government; or
Bachelor’s degree in law or its equivalent from any institution/ University recognized by any State Government or the Central Government; or
Masters in Business Administration or its equivalent from any institution/ university recognized by any State Government or the Central Government; or
Associate/ Fellow of the Insurance Institute of India, Mumbai; or
Associate/ Fellow of the Institute of Risk Management, Mumbai; or
any post graduate qualification of the Institute of Insurance and Risk Management, Hyderabad; or
Associate/ Fellow of the Institute of Chartered Accountants of India , New Delhi; or
Associate/ Fellow of the Institute of Cost and Works Accountants of India, Kolkata; or
Associate/ Fellow of the Institute of Company Secretaries of India, New Delhi; or
Associate/ Fellow of the Actuarial Society of India; or
Certified Associateship of the Indian Institute of Bankers, Mumbai; or
any other qualification specified from time to time by the Authority under these regulations; and
(ii) the principal officer of the applicant has received at least one hundred hours of theoretical and practical training from an institution recognised by the Authority from time to time.
Provided that where the principal officer of the applicant :
has been carrying on reinsurance related activity or insurance consultancy for a continuous period of seven years, preceding the year in which such an application is made; or
has for a period of, not less than seven years prior to the application made to the Authority has been a principal underwriter or has held the position of a Manager in any one of the nationalised insurance companies in India; or
is an Associate/ Fellow of the Insurance Institute of India, Mumbai; or Associate/ Fellow of the Institute of Risk Management, Mumbai; or Associate/ Fellow of the Actuarial Society of India; or any post graduate qualification of the Institute of Insurance and Risk Management, Hyderabad;
the theoretical and practical training from an institution recognised by the Authority from time to time according to a syllabus approved by the Authority shall be fifty hours.
has passed an examination, at the end of the period of training mentioned in the proviso above, conducted by the National Insurance Academy, Pune or any other examining body recognised by the Authority.
(G) Whether the principal officer has not violated the code of conduct as specified in Schedule III to these regulations;
(H) that the applicant is not engaged in any other business other than the main objects of the applicant; and
(I) the Authority is of the opinion that the grant of licence will be in the interest of policyholders.
Exception: In the case of applications made to the Authority immediately following the notification of these regulations, the requirements under sub-regulation (2)(C) shall stand modified to the extent that instead of two qualified persons mentioned in the requirement be scaled down to one person, who should have qualified himself at the latest by the time of the grant of a licence under these regulations. This exception may be available only to applications made to the authority upto 31st March, 2003.
(3) Any employee responsible for soliciting and procuring insurance business on behalf on an insurance broker shall also have to fulfill the requirements mentioned in sub-regulations (1) and (2) above and a list of such employees need to be provided to the Authority and acknowledged by it.
10. Requirements of Capital— (1) Any applicant seeking to become an insurance broker under these regulations should satisfy the following conditions:
it shall have a minimum amount of capital as mentioned below:
Minimum amount (Rupees)
(a) Direct broker
(b) Reinsurance broker
(c) Composite broker
two hundred lakhs
two hundred and fifty lakhs
the capital in the case of a company limited by shares and a cooperative society shall be in the form of equity shares ;
the capital in the case of other applicants shall be brought in cash;
the applicant shall exclusively carry on the business of an insurance broker as licensed under these regulations.
(2) No part of the capital of an applicant shall be held by a non-Indian interest beyond 26% at any time. For the purposes of these regulations, the calculations of non-Indian interest shall be made in the same manner as specified in Insurance Regulatory And Development Authority (Registration of Indian Insurance Companies) Regulations, 2000 for an insurer.