Article 4
General requirements on the use of credit assessments
1.
Insurance or reinsurance undertakings may use an external credit assessment for the calculation of the Solvency Capital Requirement in accordance with the standard formula only where it has been issued by an External Credit Assessment Institution (ECAI) or endorsed by an ECAI in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council (
11
).
2.
Insurance or reinsurance undertakings shall nominate one or more ECAI to be used for the calculation of the Solvency Capital Requirement according to the standard formula.
3.
The use of credit assessments shall be consistent and such assessments shall not be used selectively
4.
When using credit assessments, insurance and reinsurance undertakings shall comply with all of the following requirements:
(a)
where an insurance or reinsurance undertaking decides to use the credit assessments produced by a nominated ECAI for a certain class of items, it shall use those credit assessments consistently for all items belonging to that class;
(b)
where an insurance or reinsurance undertaking decides to use the credit assessments produced by a nominated ECAI, it shall use them in a continuous and consistent way over time;
(c)
an insurance or reinsurance undertaking shall only use nominated ECAI credit assessments that take into account all amounts of principal and interest owed to it;
(d)
where only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the capital requirements for that item;
(e)
where two credit assessments are available from nominated ECAIs and they correspond to different parameters for a rated item, the assessment generating the higher capital requirement shall be used;
(f)
where more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest capital requirements shall be used. If the two lowest capital requirements are different, the assessment generating the higher capital requirement of those two credit assessments shall be used. If the two lowest capital requirements are the same, the assessment generating that capital requirement shall be used;
(g)
where available, insurance and reinsurance undertakings shall use both solicited and unsolicited credit assessments.
5.
Where an item is part of the larger or more complex exposures of the insurance or reinsurance undertaking, the undertaking shall produce its own internal credit assessment of the item and allocate it to one of the seven steps in a credit quality assessment scale. Where the own internal credit assessment generates a lower capital requirement than the one generated by the credit assessments available from nominated ECAIs, then the own internal credit assessment shall not be taken into account for the purposes of this Regulation.
6.
For the purposes of paragraph 5, the larger or more complex exposures of an undertaking shall include securitisation positions as referred to in Article 178(8) and (9) and re-securitisation positions.
( 11 ) Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1).