Question
For an issuer there may exist a several types of credit assessments, most typically short-term issuer rating and long-term issuer rating.
Which one should be used to derive credit quality step in accordance with COMMISSION IMPLEMENTING REGULATION (EU) 2016/1800? Is there any rule or reccomendation? It can happen that both short term and long temr exist for issuer and each produces different CQS.
EIOPA answer
The question is how to determine the credit quality step in accordance with Title I Chapter I Section 2 of Commission Delegated Regulation (EU) 2015/35 of an item issued by the counterparty A in case that
1. The insurance or reinsurance undertaking has nominated a single ECAI
2. The ECAI provides both long-term and short-term issuer credit ratings for counterparty A
3. No directly applicable credit assessment exists for the item in question
4. No credit assessment exists for a specific issuing program or facility to which the item constituting the exposure belongs
5. The conditions for the application of a general credit assessment for the issuer set out in Article 5(2) of Commission Delegated Regulation (EU) 2015/35 are met
In the situation above the insurance or reinsurance undertaking should choose the rating which better reflects the risk of the item.