Berger Paints' insurance venture has hit a roadblock with Insurance Regulatory & Development Authority suspending the licence of Avani Insurance Services Pvt Ltd --  the insurance broking company it had acquired a few months ago.

The apex body has also questioned Berger's capability of fulfilling conditions for holding a license as specified under IRDA.

The paint major had acquired Avani to further its insurance business, which it was planning as a separate venture with Principal of UK, Punjab National Bank and Vijaya Bank each holding 25 per cent in the entity.

The paints leader, in a bid to enter the insurance sector had acquired the entire shareholding of AISP and intended to merge it with the company.

IRDA has in fact suspended the license of AISP after having received an intimation from the company that its entire holding was acquired by Berger.

According to members of the insurance regulator, the change in shareholding pattern was effected without any prior intimation to the Authority.

"This has resulted in a situation wherein the Authority is unable to assess the capability of the new shareholders to fulfill the conditions of holding a license as specified under IRDA (Insurance Brokers) Regulations, 2002 which it found detrimental to the interests of the policyholders," IRDA said.

This was exactly why, under the powers vested by regulation 35 of IRDA (Insurance Brokers) Regulations, 2002, the Authority temporarily suspended the license granted to Avani Insurance with immediate effect till such time, the new shareholders -- Berger Paints satisfies the Authority that they would be able to fulfill all the requirements as stated in IRDA (Insurance Brokers) Regulations, 2002.

IRDA has also asked AISP to suspend all insurance broking activities with immediate effect. They will not be entitled to payment of any remuneration for the insurance broking activities carried out with effect from March 25, 2004.

When contacted Berger officials said a team of company executives were scheduled to meet IRDA officials on May 13.

He expressed hope that the suspension would be lifted soon. "We have JV with some of the biggest names in the business like Principal. We are banking on their expertise to sort out the issue. We are hopeful that we would be able to convince IRDA officials. In any case, we are not going to canvass the insurance business before IRDA approval," the official said.