Insurance (prudential standard) determination No. 7 of 2010 - Prudential Standard GPS 114 - Capital Adequacy: Investment Risk Capital Charge
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Attachment B
- This Attachment sets out the manner in which counterparty grades are to be assigned for the purposes of this Prudential Standard. The table below sets out the general approach to be followed but there are exceptions as specified below.
Counterparty grades
| Grade | Standard & Poor’s | Moody’s | AM Best | Fitch |
|---|---|---|---|---|
| 1 | AAA | Aaa | A++ | AAA |
| 2 | AA+AAAA- | Aa1Aa2Aa3 | A+ | AA+AAAA- |
| 3 | A+AA- | A1A2A3 | AA- | A+AA- |
| 4 | BBB+BBBBBB- | Baa1Baa2Baa3 | B++B+ | BBB+BBBBBB- |
| 5 | BB+ or below | Ba1 or below | B or below | BB+ or below |
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Unrated assets or exposures must be classified as Grade 4.
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Where APRA supervises a consolidated insurance group[15], APRA may, at the request of an insurer within the group, determine the counterparty grade of a non-APRA-authorised reinsurer which:
(a) has no external credit rating; and
(b) is a member of the group.
- An insurer must, in general, use the same rating agency for determining counterparty grades. An insurer may depart from this general rule where there are good reasons for doing so, such as under the following circumstances:
(a) where the rating agencies usually monitored by the insurer do not issue a solicited credit rating for a particular debt obligation and only one other rating agency issues a solicited credit rating for that debt obligation, the insurer may use that solicited credit rating; or
(b) where the rating agencies usually monitored by the insurer do not issue a solicited credit rating for a particular debt obligation, the credit ratings issued by all other rating agencies listed in the table above must be reviewed and the rule in paragraph 5 of this Attachment must be used to determine which rating agency will be used to determine the counterparty grade and therefore the Investment Capital Factor to be applied; or
(c) the rule in paragraph 5 of this Attachment may also be applied where the insurer monitors multiple rating agencies that provide different solicited credit ratings for a particular debt obligation.