Insurance Regulatory and Development Authority

Re.: Suspension of Broking License Code No. 128/03 & License No. 170
M/S. MF Insurance & Reinsurance Services

A complaint was received against MF Insurance & Reinsurance Services from President, Reliance General Insurance Company Limited vide their letter dated 7 th April, 2005 alleging gross irregularities with regard to placement of 60% of risk of Jeweler’s Block Insurance issued to M/s M. Suresh & Co.

The IRDA vide its letter no. 128/ broke – MF/ 2005 dated 30.9.2005 appointed Ms Suvira Das as the Inspecting Officer to investigate the case. The Inspecting Officer in her report dated 17.1.2006 had observed that:

the broker failed to provide a true and complete copy of reinsurance placement slip to the insurance company
the broker failed to provide a true copy of the placement slip signed by the leading reinsurer until after expiry of the policy
the broker failed to follow up the cover note by a formal signed reinsurance policy document within one month of receipt of reinsurance premium which was received by the broker on 24.9.2004
the broker did not keep the insurance company informed of the placement of the cover nor did they inform the insurance company of the changes in reinsurer, a fact known to the broker through their co-broker, Hughes & Partners.

Following this the IRDA vide its notice dated 10 th May, 2006 decided to conduct an Enquiry into the matter and appointed Ms M.G. Meenakshi as the Enquiry Officer. The Enquiry Officer has submitted her Interim Report dated 2 nd January, 2007 , wherein she has given her finding that:

MF Re have violated provisions of 2a, 2b, 2i, 3e, 4c, 5a, 5c 5d and 9b of the Code of Conduct Schedule III of the IRDA (Insurance Brokers) Regulations, 2002; and
There are contra indications on the basic issue of there being a valid reinsurance cover placed by MF Re for the Risk of M/s. M. Suresh & Co. sought to be reinsured by Reliance General Insurance Co. Ltd.

The Enquiry Officer has further commented on the following aspects, which came to light during scrutiny of the records produced during the enquiry proceedings:

During the enquiry the invoices raised by Hughes and Partners Limited on MF Insurance and Reinsurance Services for the combined remittance made by HDFC Bank in respect of 9 risks amounting to Rs. 1.43 crs were examined. It was observed that out of 9 risks 8 risks were reinsured with Condor Insurance. In case of M Suresh & Co, MF Insurance and Reinsurance Services stated that the risk was placed with Condor Insurance. However, on being asked to furnish documentary proof for the transfer of premium from corresponding broker a/c to Condor a/c and also the signed copy of the cover note issued by Condor Insurance issued for the period 2004-05, MF Insurance and Reinsurance Services could not produce the same. On cross verification from other insurers whether they had accepted Condor Insurance as the Reinsurer, it was found the Reinsurer to whom the premium has been remitted and those whose names are given in the slip issued by MF Insurance & Reinsurance services are different.

In light of the above findings, the Authority is of the view:

that the Broker had violated Regulation 21 read with Schedule III – Code of Conduct of the IRDA’s (Insurance Brokers) Regulations, 2002.
that the Broker committed serious irregularities against the cedants by giving wrong names of the reinsurers.
that the insurance company may have been put in financial jeopardy had a claim arisen under the policies, since the reinsurers so named in the reinsurance slip issued by the broker were not on risk.

Therefore, pending further enquiry, in exercise of powers granted to it under Regulation 35 of the IRDA’s (Insurance Brokers) Regulations, 2002, the Authority has suspended the license of the broker vide its order dt. 9 th February, 2007 .

(K. K. Srinivasan)
Member