Dubai Financial Services Authority Fines DIFC Reinsurance Broker for Misleading Clients & Reinsurers

Key Takeaways

• Misleading Premium Practices: The DFSA found that the broker provided different premium figures to insurers and reinsurers for the same reinsurance placements.
• Commission Transparency Failures: Reinsurers and at least one client were misled about premium deductions and brokerage commissions, including across 121 placements.
• Control Breakdowns: The misconduct was enabled by weak internal controls, non-disclosure of commissions, and the use of altered documents.
• Settlement and Restitution: The firm self-reported the issues, conducted an internal investigation, and paid restitution, contributing to a reduced penalty.

Deep Dive

The Dubai Financial Services Authority has fined reinsurance broker Ed Broking (MENA) $455,176 after concluding that the firm engaged in misleading and deceptive conduct across a series of reinsurance placements in the Dubai International Financial Centre.

The enforcement action, announced on February 2, follows an investigation that found the firm provided inconsistent and misleading information to both cedent insurers and reinsurers, particularly around premiums, deductions, and brokerage commissions.

According to the DFSA, Ed Broking supplied different premium figures to cedent insurers, the original insurers issuing the underlying policies, and to reinsurers for the same reinsurance placements. Reinsurers were also misled about how deductions were applied to premiums and about the level of brokerage commission earned by the firm.

The regulator further found that one client had been misled about brokerage earned by the firm on 121 placements, as well as about premium deductions on some of those transactions. In several cases, the misconduct involved the use of altered documents.

The DFSA said these issues were enabled by Ed Broking’s failure to disclose brokerage commissions to its clients and by the firm’s failure to follow its own systems and controls. The regulator also concluded that the firm did not take reasonable steps to ensure its communications with cedent insurers and reinsurers were clear, fair, and not misleading, and that it failed to act with due skill, care, and diligence.

The total fine comprises USD 175,343 in disgorgement (including $148,039 plus $27,304 in interest) alongside a penalty of USD 279,833. The amount was reduced from USD 575,104 after the firm agreed to settle the matter.

In announcing the outcome, the DFSA acknowledged that Ed Broking had promptly reported the misconduct, carried out an internal investigation, and paid restitution to clients affected by placements involving altered documents.

Still, the regulator was clear about the seriousness of the conduct. Alan Linning, Managing Director of Enforcement at the DFSA, said firms operating in the DIFC are expected to meet high standards in how they deal with clients and counterparties.

“In misleading clients and reinsurers as it did, Ed Broking failed to meet these expectations,” Linning said. “The fine imposed on the Firm reflects the seriousness of its misconduct and serves to warn others against engaging in similar conduct.”

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