Financial Daily from THE HINDU group of publications
Friday, Apr 29, 2005
Bank accounts hacking: MphasiS to lodge insurance claims
Bangalore , April 28
MPHASIS BFL is planning to lodge insurance claims for covering the losses incurred in the recent hacking of Citibank's accounts by some employees of its call centre subsidiary MsourcE in Pune.
MphasiS officials said, "The company is fully insured against such incidents and claims will be made with the insurers." The officials said that the claims would be made after the case is closed and that the company is fully covered.
The siphoned amount by hacking the Citibank's New York accounts amounted to over $3,50,000 between March '04 and February '05. Citibank is one of the key customers of MsourcE.
These kinds of risks are insured under liability covers provided by the general insurance companies. The lead insurer for MphasiS that has provided liability cover is the private sector Tata-AIG General Insurance Company Ltd, sources said. The Tata AIG Managing Director, Mr Dalip Verma, declined to comment on the issue.
"I have no comments to offer," he said replying to an e-mail query.
Insurers, however, said that the MphasiS would have to make the claims immediately. This was because the insurance companies themselves would have to make suitable provisions for such liabilities in their profit and loss account. Any settlement of the claim would, therefore, take place only after the closure of the case, they said.
But even in this case, the lead insurer is unlikely to incur any major liabilities. This is because the lead insurer has co-insured the risks with other domestic insurance companies.
Besides, each of these insurance companies that had participated in the business had in turn ceded the risks to their overseas partners through reinsurance contracts.
Ceding is a process of passing the liability to the re-insurer for a commission with the objective of reducing the possible liabilities.
Sources said that one of the major re-insurers in the case of this deal was AIG, which is the joint venture insurance partner in Tata-AIG.
Consequently, the liabilities would have to be fully absorbed by the re-insurers.
The sources said that this incident is, however, likely to trigger a review of the some of the liability covers by the domestic and international insurance companies.
This, in turn, is likely to reverse the softening trend of insurance premiums and instead lead to a hardening, they added.
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