A Malaysia-based subsidiary of the Salama group, BEST RE (L) Ltd., is disputing potentially significant losses on a facultative reinsurance contract that it wrote covering "loss of telephone handset" insurance in South Korea. This potentially large liability could further compound the significant losses booked by BEST RE (L) in 2012 for flood claims in Thailand; we therefore consider that capital adequacy at the reinsurance subsidiary may have weakened significantly. Contrary to our previous expectations, the parent Salama/Islamic Arab Insurance Co. (Salama/IAIC) has not yet moved to support its BEST RE subgroup with a significant capital increase. This has raised concerns regarding our view of BEST RE's "core" status within the wider group. We are also concerned that the subgroup's problems
