The IRDAI has directed lndian insurers and their offices overseas, lndian reinsurers and their offices overseas, foreign reinsurance branches in lndia and lndian insurance intermediaries not to engage in any business activity with Labuan-registered broker, Confiance lnternational Reinsurance Brokers, as well as its representative Jaipur-based Global Master Consultant (GMC).
Similarly sanctioned are Steven Chetty, MD of Confiance; as well as Dr Mukesh Ranwan and Mr Sachin AgaMal, directors of GMC who are the representatives of Confiance in lndia.

The issue concerns a INR3bn ($42m) crop reinsurance fraudulent deal that harmed Tata AIG General Insurance.

According to the order issued by the IRDAI, the Authority received an email sent by the chief risk & compliance officer of Tata AIG on 21 December 2018 informing the regulator of the fraud committed against the company with regard to the placement of reinsurance protection through Unison lnsurance Broking Service of India.

Unison, a composite broker registered by the IRDAI, had made facultative reinsurance arrangements to support crop reinsurance risk cover of Tata AIG for the financial year 2018-19, through Confiance involving their lndian representative GMC. Mr Steven L Chetty is the MD of Confiance in Malaysia and Dr Mukesh Ranwan and Mr Sachin Agarwal are the representatives of Confiance heading GMC in lndia.

Confiance in their email dated 12 July 2018 and 31 July 2018 provided the best terms for placement with two reinsurers: Tokio Marine Kiln Syndicate 510 (TMK); and Best Meridian lnsurance (BMI).

As per market practice, the reinsurance placement was confirmed with copies of signed slips purportedly from the participating reinsurers, one slip signed and stamped by TMK on the letterhead of ARB lnternational and the other by BMl, US.

ln due course, Unison remitted the reinsurance premiums of INR11.3m and INR61.7m respectively to Confiance, after deducting brokerage on 25 September 2018 and 22 October 2018 respectively.

Fraud discovered

ln November 2018, Tata AIG officials learnt that TMK was not participating in the facultative placement of its crop business. Immediately, 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 reinsurance and the slip purportedly signed by TMK was not issued by them. Tata AIG contacted BMI which confirmed that it was not participating in the placement and that BMI Global and its affiliates or subsidiaries had not quoted, underwritten, signed or executed any reinsurance involving Tata AlG.

Tata AIG took up the matter with Unison, which upon examination came to the conclusion that the slips provided by GMC, the lndian representative of Confiance, were fraudulent. Chetty in his email dated 20 November 2018 to the broker, expressed his distress about the forged documents and informed the broker that Confiance was unaware of nor had it authorised such action. He further informed the broker that the funds were sitting in the accounts of Confiance, for a risk which they did not officially place. He arranged for the return of the funds to Unison and the broker in turn refunded the premiums to Tata AIG.

Unison lodged a complaint on 29 November 2018 with the police against Ranwan and Agarwal, both of GMC, and Mr Chetty of Confiance. A legal notice was served on GMC and Confiance on 31 December 2018.

Tata AIG filed a complaint with the IRDAI against Unison on 21 December 2018 alleging fraud in the reinsurance placement bid pertaining to crop insurance in the Rajasthan cluster for kharif 2018. The IRDAI sought a report from Unison on 26 December 2018. Unison replied to the IRDAI on 3 January 2019 explaining how it was also defrauded and that it had made a complaint to the Economic Offences Wing of the Mumbai Police.

Malaysian authorities

The IRDAI took up the matter with Bank Negara Malaysia (BMN) and the Labuan Financial Services Authority (Labuan FSA), through letters dated 8 February, 2019. lt brought to their notice the fraud committed by Confiance. The IRDAI received an e-mail dated 11 February, 2019 from the Labuan FSA advising that the matter had been escalated to the supervision and monitoring team for further action. A similar email dated 11 February 2019 was received from BNM informing the IRDAI that the complaint had been escalated to governor’s office for information and further action.

Rebuke by IRDAI

Referring to Confiance, the IRDAI says that “the conduct of the foreign reinsurance broker indulging in forgery is serious and cannot be ignored, which can have adverse repercussions not only in lndia but in the entire reinsurance market globally”.

The IRDAI statement added, “Considering the facts stated above and the involvement of Confiance—foreign reinsurance broker in the chain of events and implications for the reinsurance market in lndia—it is established that the cession of reinsurance premiums, issuance of the forged reinsurance slips and subsequent refund of the reinsurance premiums by Confiance constitute a serious and grave offence. Confiance betrayed the trust of the reinsurance market and caused damage to the financial strength of Tata-AIG in lndia which cannot be ignored by the IRDAI.

“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 they put the existence of general insurance companies in peril. During the entire episode, Confiance made no efforts to clarify its stance and simply returned the premiums, which in turn proves that Confiance intentionally committed this act by not placing the risk with foreign reinsurers and issued forged reinsurance slips to the lndian reinsurance broker.”


The IRDAI sought clarifications from Unison on how they developed terms with GMConsultants, a representative of Confiance for placing facultative reinsurance support for a crop insurance placement of Tata AlG, in violation of the lnsurance provisions.

The broker stated that it utilised the services of the foreign broker, Confiance, for the placement of reinsurance with reinsurers outside lndia. To utilise the services of the foreign broker, Unison corresponded and dealt with Chetty. ln the correspondences and interactions, Chettywould keep his lndia representatives in copy for coordination but Unison solely and exclusively dealt with him. The payments of the reinsurance premiums were directly paid to the bank account of Confiance and all receipt of funds were acknowledged by the foreign broker.

But by e-mail on 12 June, 2018 addressed to GMC, Unison requested them to get reinsurance support for Tata AIG crop insurance. The same was acknowledged by GMC. E-mails dated 11 July 2018 and 12 July 2018 “confirming” participation by BMl, USA, and TMK were sent by GMC. Subsequent emails by Unison were addressed to GMC directors Rawan and Aggawal.

The IRDAI says that from the correspondence exchanged through emails, it is apparent that GMC was an unregistered entity with whom Unison was dealing through Ranwan. Confiance was am unregistered entity in lndia and by virtue of the interaction with its representative in lndia, Unison was dealing with an unregistered entity which is a violation of regulations.

Unison counterargued that it had utilised the services of Confiance for reinsurance, which was disclosed to Tata AIG. Unison submitted that it is incorrect to state that they appointed or transacted insurance business with GMC). They had no agreement with GMC, they issued no appointment letter to GMC, they had no transaction with GMC and did no correspondence with GMC. Ranwan was acting in his individual capacity under the direct instructions of Confiance. Unison also denied that it requested GMC to get reinsurance support for Tata AIG crop insurance. According to Unison the e-mailed requestl was to Confiance instead.

However, the regulator maintains that Unison was transacting insurance business with GMC and the matter has been referred for further proceedings. The IRDAI noted other lapses by Unison, including steps it should have taken that would have made it known that the reinsurance had not been placed with the reinsurers. The regulator fined Unison INR10m for the violations.

The IRDAI said, “The actions of Unison put Tata AIG in a difficult position. They suffered a loss because they did not have adequate reinsurance protection as a result of which their financials were impacted. Such an action deserves the highest level of attention as it hits the very foundation of insurance/ reinsurance business of placing trust with a reinsurance broker. A cedant relies on the reinsurance slip submitted by the reinsurance broker to assume that the risk is placed and there is no gap in reinsurance protection. lf the reinsurance protection is found to be non-existent, the entire risk that was supposed to be passed on to the reinsurer falls into the lap of the direct insurer who is obliged to make good the loss, as he has issued an insurance policy to the policyholder. lt is because of this important nature of transaction that utmost care has to be exercised by the insurer and the insurance broker. Any shortcomings can have very serious consequences even to the extent of a failure of an insurance company.




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