Best Re to Invest in Its Relocated Reinsurance Units in Labuan

Best Re, an Islamic reinsurance group, said it plans to invest 480 million ringgit (US$156.4 million) in its newly relocated life and nonlife reinsurance units in Labuan, Malaysia.

Best Re (L) Ltd. and Best Re Family (L) Ltd., the nonlife and life reinsurance units of Best Re, relocated their headquarters from Tunisia to Labuan International Business and Financial Center, Malaysia's offshore financial center, last November. The group "expects to keep momentum by achieving even better performances in the years to come," said Best Re in a statement.

Best Re launched its first regional office in Labuan about 10 years ago. The Malaysian operations now account for about 75% of the company's portfolio, according to Best Re. The investment is to strengthen Best Re's operations in Labuan.

The Labuan-based nonlife and family retakaful operations are capitalized at US$140 million and US$10 million, respectively. Best Re is a fully owned subsidiary of Dubai-based Salama Group, which also holds five direct takaful insurance operations in United Arab Emirates, Saudi Arabia, Egypt, Algeria and Senegal.

The reinsurance group said it aims to tap the expanding retakaful market, which has been growing 20% annually and is expected to reach US$9 billion by 2020. The reinsurer runs businesses in more than 20 countries through six regional offices in Tunisia, Senegal, Mauritius, Lebanon, Turkey and Malaysia.

Best Re said Malaysia, positioned as an Islamic financial hub, is an ideal business location and will potentially boost foreign investment. The company is seeking to continue expansion of business in its traditional markets of Malaysia, the Middle East and Northern Africa as well as to take advantage of the potential growth in life products in Southeast Asia.

Last November, A.M. Best Europe – Rating Services Ltd. assigned a financial strength rating of A- (Excellent) and issuer credit rating of a- to Best Re and Best Re Family, with an outlook of stable (BestWire, Nov. 29, 2010). A.M. Best then withdrew the FSR of A- (Excellent) and ICR of a- of Best Re (Tunisia) and assigned an NR-5 (Not Formally Followed) to the FSR and an nr to the ICR as a result of the company's portfolio being transferred to the two new Labuan entities and the company ceasing reinsurance operations.

According to A.M. Best, the ratings of the two reinsurance units reflect their significant importance to their ultimate parent, Salama Islamic Arab Insurance Co. (P.S.C.), with Best Re Non-Life representing the majority of Salama's consolidated gross written premium and Best Re Life being the key driver behind the group’s life reinsurance expansion plans. These newly formed companies represent the nonlife and life portfolios, respectively, of Best Re, which has been separated into distinct entities upon the group's relocation to Labuan, Malaysia, said A.M. Best.

(By Iris Lai, Hong Kong bureau manager: [email protected])