MARC has withdrawn its A+ insurer financial strength (IFS) rating on Best Re (L) Limited (BEST RE) at the general reinsurer's request. The outlook was negative at the time of withdrawal. MARC has not been able to update the rating prior to withdrawing it due to insufficient available information.

The negative outlook attached to BEST RE’s rating in January 2013 had reflected the potential for further pressure on the IFS rating in the event that BEST RE is unable to demonstrate steady progress in executing its business plan and restoring underwriting profitability.  In the nine months to September 30, 2012 (9M2012), BEST RE's operating performance had been negatively impacted by heavy insured losses from the 2011 Thai floods. At MARC's last review, the rating agency had been informed of BEST RE's planned withdrawal from markets that have incurred operating losses and efforts to strengthen premium rates. An important assumption in the ‘A+’ rating was that there would be no further deterioration in the reinsurer’s capitalisation.

MARC does not have current information on BEST RE's capital adequacy and claims paying resources. The rating agency had been informed during its last review of the reinsurer's plans to decrease its insured exposures to improve its risk-adjusted capital position. Following a period of heavy Thai flood-related losses and without the benefit of new equity capital infusion, MARC believes BEST RE could conceivably face a narrowing of its business opportunities and be more weakly positioned to absorb further financial losses and take advantage of improvements in market pricing fundamentals. Of rating concern also is BEST RE's potential exposure to adverse developments arising from disputed smartphone claims on reinsurance coverage provided to a South Korean general insurer.

BEST RE has yet to issue its full year results for the financial year ended December 31, 2012, however, MARC believes that the reinsurer's losses could have widened for the full financial year ended December 31, 2012 based on the announced consolidated financial results of its ultimate holding company, the Dubai-based Islamic Arab Insurance Co. (Salama Group). In the absence of interim results for the first two quarters of 2013 and information on underwriting and operating trends, MARC is unable to monitor and evaluate the reinsurer's overall operating profile. It remains uncertain whether BEST RE has turned the corner and is on the path to recovery.

MARC will no longer provide analytical coverage on BEST RE upon withdrawal of the aforementioned rating.

Contacts:
Sharidan Salleh, +603-2082 2254/ sharidan@marc.com.my;
Oo Chin Kai, +603-2082 2260/ chinkai@marc.com.my.