• Minimum required net worth- An insurance broker must at all times during the validity of the certificate of registration maintain a net worth of Rs. 50 lakhs (for direct brokers) and 50% of the minimum capital requirements or contributions or similar stated in Regulation 19(1) (for composite and reinsurance brokers).

  Every half-year, the insurance broker auditor is tasked with determining whether the insurance broker has duly completed and submitted a net-worth certificate to the IRDAI.

• Internal systems and controls- Every insurance broker has a responsibility to make sure that an appropriate internal audit system is in place and that it is adequate for the size, nature, complexity and structure of the business.

  Additionally, the insurance broker must have internal audit procedures in place and appoint a compliance officer who works for the insurance broker in cases of reinsurance and composite brokers.

  A compliance officer who is in charge of the internal controls and systems must be appointed by an insurance broker who receives more than 5 crores in total as a remuneration, according to the insurance broker auditor.

• Maintaining documents, such as records and books of accounts- A balance sheet or statement of affairs at the end of each accounting period, a profit and loss account for that period, a state of cash/fund flow through direct method, and any additional statements on insurance brokering business that the IRDAI may require must all be prepared for a financial year by every insurance broker.

  A copy of the above-mentioned records' audited financial statements and an auditor's report must be sent by the insurance broker to IRDAI no later than 30 days after the annual general meeting, or by September 30 of each year, whichever comes first. The statutory auditor is also required to provide any comments or observations he may have regarding the status of the accounts, the way business is conducted, etc., also reason behind such observations, which must be appended to the accounts that will be filed to with IRDAI.

  Within 90 days of the date the auditor's report was submitted, an insurance broker auditor is required to determine whether the broker has taken any action to address the shortcomings the auditor identified in its report. Accordingly, the broker is required to inform IRDAI of the actions it has taken.

  The insurance broker is required to keep all of the aforementioned records at the insurance broker's head office or any other office they want to designate and make known to IRDAI. This is done to make it simpler for IRDAI officers to check these records.

  All records, books of accounts, and other documents indicated above must be kept on file for at least seven years from the end of the year to which they pertain. Documents that are related to cases that are still ongoing in court are required to be kept on file until such cases are resolved. Additionally, all other documentation in the case of reinsurance brokers must be kept on file until their natural expiration.

  An insurance broker auditor is required to issue a certificate attesting to conformity with these regulations in the manner specified in the schedule, and the auditor is required to submit the certificate to IRDAI.

  On the other hand, each insurance broker must provide the names and contact information of the statutory auditors they have hired in addition to the audited accounts submitted in the required format. The insurance broker auditor may be appointed for a maximum continuous period of up to five years, it must be mentioned.

• One client's contribution to the business's maximum- The insurance broker auditor must determine if the broker's business is conducted in a manner that only one client does not account for more than 50% of the broker's total revenue in a given financial year.

  Along with the audited accounts, an insurance broker must provide an annual certificate officially provided by a Chartered Accountant attesting to conformity with this requirement.

Obligations

Insurer- The insurer within the group is required to provide an undertaking that it will refrain from offering higher remunerations to the insurance broker within the group that are more favourable than what is offered to other insurance brokers on the same proposal for insurance and that it will not design specific insurance products for the insurance broker within the group that are more expensive than those that are offered to other brokers for the same class of insurance or insurance products.

Every year, along with the insurer's audited financial statements, the insurance broker auditor must make sure the insurer has filed an audit certificate on conformity with the aforementioned undertaking.

Insurance broker- In all correspondence with clients, in all promotional materials, and at all of the broker's offices, the broker must clearly state that it is a sister company of the insurer and a member of the same promoter group.

An insurance broker auditor must confirm that, in accordance with the Accounting Standards, the broker has revealed Related Party transactions with the insurance company that is a member of the promoter group in its audited accounts and balance sheet.

The auditor must also make sure that the broker does not provide officials or staff members of the insurer inside the group with loans or other similar facilities or incentives, and vice versa.

Filing Returns

The following certificates must be properly certified by the auditor and provided to IRDAI before the end of each year on October 31 and April 30.

• A certificate attesting that the insurance broker is maintaining the necessary capital, that the broker is only engaged in insurance broking, and that the broker is maintaining the mandatory net worth as required by the relevant rules and the prescribed annexure.
• A certificate attesting to the insurance broker's compliance with all relevant regulations and annexures in preserving the deposit in the designated banks.
• A certification stating that, in accordance with the relevant legislation and the annexures indicated in the regulations, a professional indemnity policy is in effect.
• A certificate attesting to the insurance broker's receipt of remuneration within the parameters outlined in the relevant Regulations and associated annexures.
• A certificate stating that an insurance broker, such as a composite broker or reinsurance broker, is in compliance with Regulation 33 of the Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018, and also a separate insurance bank account is being opened, and the funds in the said account are being used only for the purposes listed in the aforementioned regulations.
• A certificate on the amount of remuneration or fees collected during the period and any transfers made to any other accounts in accordance with these laws in the case of a composite broker or reinsurance broker.

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