IRDAI penalises Malaysian brokers for cheating TATA-AIG in Rs 300 cr crop reinsurance deal
It all started when TATA-AIG General, which has since exited the crop insurance business after losing money heavily in the deal, made a complaint to IRDAI against Unison lnsurance Broker on Dec 21,2018 alleging fraud in reinsurance placement pertaining to crop insurance,with a premium of around Rs 300 crore in Rajasthan cluster for Kharif 2018.
Regulator IRDAI has completed its year-long investigation and pronounced its verdict about a Rs 300 crore fraudulent crop reinsurance deal in which TATA AIG General Insurance has dealth with multiple intermediaries including Unison Insurance Broker, an Indian composite insurance broker, Confiance, a Malaysian based broker and its Jaipur based agents in India- Global Master Consultant(GMC),
It all started when TATA-AIG General Insurance, which was forced to exit the crop insurance business after losing money heavily in the reinsurance deal, made a complaint to the IRDAI on Dec 21,2018,informing about a fraud committed on the company in the reinsurance placement,through M/s Unison lnsurance Broking Services, of a Rs 300 crore crop reinsurance deal from Rajasthan cluster for Kharif 2018.
Asia Insurance Post had tried earlier to check about the details from Tata Aig General Insurance but the company had refused to respond.
While awarding penalties in the case, in an order signed by Sujay Banarji,member (Distribution)IRDAI, has barred Steven Chetty, MD, Confiance from doing insurance/ reinsurance business in lndia and lndian insurers and its offices overseas,as he had played an active and primary role in the fraudulent deal.Mukesh Ranwan and Sachin Agarwal,directors of GMC who are the representatives of Confiance in lndia have been also barred from doing any insurance/ reinsurance business in lndia, Indian insurers and its offices overseas. Also lndian reinsurers and its offices overseas, foreign reinsurance branches in lndia and lndian insurance intermediaries are dircted not to engage in any business activity with Ranwan, Agarwal directors of GMC.
IRDAI has also fined Unison Brokers, which was the primary broker for the Tata Aig General insurance in the deal, to the tune of Rs one crore.
Modus Operandi of the fraud
The IRDAI had received an email sent by chief risk & compliance Officer, Tata AIG General lnsurance Company on Dec 21,2018 informing the fraud committed against its company with regard to the placement of reinsurance protection through Unison lnsurance Broking Services. a composite Baroda based broker that had made Facultative reinsurance arrangements to support company's crop reinsurance risk cover in 2018-19, through Confiance lnternational Reinsurance Broker L.L.C, a Malalaysia based broker involving their lndian representative GMC,
Steven L Chetty is the MD of Confiance in Malaysia and Mukesh Ranwan and Sachin Agarwal are the representatives of Confiance heading GMC in lndia.Confiance had provided the best terms for placement with two reinsurers- Tokio Marine Kiln Syndicate and Best Meridian lnsurance
As per market practice, the reinsurance placement was confirmed with copies of signed slips of the participating re-insurers (one slip signed and stamped by TIvIK on the letter-head of ARB lnternational and another one from BMl, US) ln due course, the broker remitted the reinsurance premium of Rs 1.13 crores and Rs 6.17 crores respectively to Confiance, after deducting its brokerage ln November 2018, it has come to the knowledge of Tata AIG officials that TIVIK is not participating in the facultative placement of its crop business.
lmmediately Tata AIG contacted the General Counsel of TMK with a copy of the TMK signed Reinsurance slip provided by Confiance. After checking internally, TMK confirmed that they had not provided any support for the re-insurance and the slip purportedly signed by TMK was not issued by them,
Tata AIG contacted BMl and BMI confirmed that it is not on risk and BMI Global and its affiliates or subsidiaries have not quoted, underwritten, signed or executed any reinsurance involving Tata AlG. Blvll further informed that it is opening an investigation regarding the original source of this document and confirmed that BMI does not accept or recognize being bound to this coverage.
TATA AIG took up the matter with the broker. After examining the matter,the broker came to the conclusion that the slips provided by GMC, the lndian Representative of Confiance are fraudulent slips.
Steven, in his email to the Unison Insurance Broking Services, expressed his distress on the situation/ forged documents and informed the broker that Confiance is not aware or authorized such action. Steven further informed the broker that the funds are sitting in the accounts of Confiance, for a risk which they did not officially place. Steven arranged for transfer of funds to the broker and the broker in turn refunded the premium to Tata AIG General Insurance.
Unison lnsurance broker has lodged a complaint with the joint police commissioner,economic offences wing, Mumbai against Ranwan and Agarwal of GMC and. Steven and served a legal notice to Gtvlc and Confiance
According to the IRDAI,considering the facts stated above and the involvement of Confiance - foreign reinsurance broker in the chain of events and its implication in the reinsurance market in lndia, it is established that the cession of reinsurance premium, issuance of the forged reinsurance slip and subsequent refund of the reinsurance premium by Confiance constitutes a serious and grave olfence.
Confiance betrayed the trust of the reinsurance market and caused damage to the financial strength of TATA-AIG General Insurance in lndia
The IRDAI is of the firm view that the actions of Confiance were deliberate and harmful. Such actions cannot under any circumstances be tolerated as it put the existence of general insurance companies in peril.
During the entire episode Confiance made no efforts to clarify its stance and simply return the premium which in turn proves that Confiance intentionally committed this act by not placing the risk with the foreign reinsurers and issued forged reinsurance slips to the lndian reinsurance broker.
Industry analysts, however, have pointed that regulatory action on the erring brokers should been more stringent to keep a check on these kind of developments in the industry.
They also point out, Indian insurers have tendency look for cheaper pricing without caring for quality of support and prefessional players.``That should change now,'' they said.