The Insurance Regulatory and Development Authority of India (“ IRDAI or Authority ”) issued an Order bearing reference number: IRDAI/INT/ORD/MISC/43/02/2024 dated February 22, 2024, in the matter of M/s. Confiance International Reinsurance Brokers L.L.C. (“Confiance”) with respect to the issuance of forged reinsurance slips to Unison and non-placement of reinsurance of crop insurance risk of TATA-AIG General Insurance Company Ltd.
Factual Background
The IRDAI received a complaint on December 21, 2018, from TATA-AIG General Insurance Company Ltd. regarding the non-placement of reinsurance of its crop insurance risk through Unison. The investigation revealed the involvement of Confiance and Globe Master Consultants (GMC) in the non-placement, along with the issuance of forged reinsurance slips to Unison. As a result, the IRDAI issued an order on January 8, 2020, against Confiance and GMC, directing Indian insurers, reinsurers, foreign reinsurance branches in India, and insurance intermediaries not to engage in any business activity with Confiance. Additionally, individuals associated with Confiance, including Mr. Steven Chetty, were barred from conducting any insurance/reinsurance business in India.
Confiance and Mr. Steven Chetty appealed the IRDAI’s order before the Securities Appellate Tribunal (SAT), challenging its jurisdiction and asserting a lack of notice and opportunity for a hearing. The SAT, in its order dated October 7, 2021, deemed the appeal maintainable, citing a breach of natural justice as no opportunity for a hearing was provided to Confiance and Mr. Steven Chetty. The SAT allowed the appeal and granted the IRDAI the authority to proceed against Confiance and Mr. Steven Chetty in accordance with the law.
Charge
Following this SAT order, the IRDAI issued a show-cause notice to Confiance on December 27, 2021, outlining various alleged violations, including not acting with due care, not confirming cover to the insurer, and acting with malafide intentions, among others, pursuant to relevant provisions of the Insurance Act, 1938, the IRDA Act 1999, and associated regulations and rules.
IRDAI’s Observation
Confiance’s response to the show cause notice is deemed untenable by the Authority. The statement highlights Confiance’s reliance on GMC’s representations regarding BMI and TMK’s involvement in crop insurance, despite knowing the contrary. Confiance failed to take proactive measures, neither approaching regulatory authorities nor filing complaints with law enforcement agencies, when informed by GMC about the forgery of slips.
Furthermore, Confiance’s delayed remittance of funds to TATA-AIG, lack of communication with reinsurers, and absence of reasons for these actions are noted as critical points. Confiance’s claim that Unison accepted forged slips without verification is criticized for lacking supporting documentary evidence. The discrepancy in Confiance’s submission about an undisclosed transfer of USD 837,000 is refuted with evidence of a credit note issued by Confiance. Additionally, Confiance’s assertion that Unison sought to channel business through them lacks substantiating documents.
In summary, Confiance’s responses, both in written submissions and during the personal hearing, fail to provide sufficient documentary evidence to reconsider the IRDAI’s decision made on January 8, 2020. Consequently, Confiance is deemed to have inadequately addressed the charges outlined in the show cause notice.
Decision of the Authority (IRDAI)
The IRDAI, based on the established facts and the involvement of Confiance, a foreign reinsurance broker, and its Indian representative, GMC, concludes that Confiance’s actions constitute a serious violation in the reinsurance market in India. Specifically, the cession of reinsurance premium, issuance of forged reinsurance slips, and subsequent refund by Confiance are deemed grave transgressions. The repercussions of Confiance’s actions are noted to have caused inconvenience to TATA-AIG in India, posing potential losses to the insurer and its policyholders.
The IRDAI asserts that Confiance’s conduct throughout the episode, marked by a lack of efforts to clarify its stance and a mere refund of the premium, indicates a failure to exercise due care and diligence. As a result, exercising its powers under Section 14(1) of the IRDA Act, 1999 the Authority:
a. imposes a two-year prohibition on Confiance from participating in the Indian insurance market, both directly and indirectly.
b. directs Indian insurers, reinsurers, foreign reinsurance branches in India, and Indian insurance intermediaries to refrain from engaging in any business activity with Confiance for the same duration.
A copy of the order is attached for your ready reference.
Source category: IRDAI
Attachments
- /2024/360_ORDER_In_the_matter_of_Confiance_International_Reinsurance_Brokers_L_L_C_,_Labuan,_Malaysia.pdf
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