3. Counterparty Grades
3.1. Meaning of Counterparty Grade
(1) In this Schedule:
(a) Counterparty Grade (or Grade) has the meaning given by sub-rule (2); and
(b) Invested Asset means an asset, right or interest held by a Takaful Operator or by a Takaful Fund for the primary purpose of generating revenue or for directly providing funds to meet potential cash outflows.
(2) For this Schedule, the Grade of an asset is its Grade according to the rating of its counterparty, in accordance with table A.
Table A Grade of assets according to counterparty ratings
Item | Rating of counterparty by: | Grade of asset | |||
Standard & Poor’s | Moody’s | A. M. Best | Fitch | ||
1 | AAA | Aaa | A++ | AAA | 1 |
2 | AA+ AA AA- | Aa1 Aa2 Aa3 | A+ | AA+ AA AA- | 2 |
3 | A+ A A- | A1 A2 A3 | A A- | A+ A A- | 3 |
4 | BBB+ BBB BBB- | Baa1 Baa2 Baa3 | B++ B+ | BBB+ BBB- | 4 |
5 | BB+ or below | Ba1 or below | B or below | BB+ or below | 5 |
Unrated assets, exposures and counterparties must be classified as Grade 4.
3.2. Using different credit rating agencies
(1) An AIFC-Incorporated Takaful Operator must rely on the ratings issued by the same credit rating agency for determining Counterparty Grades unless the AIFC-Incorporated Takaful Operator has good reason to use a different credit rating agency or agencies.
(2) If a counterparty or debt obligation has been rated by more than 1 rating agency and there are 2 or more ratings that lead to different capital charges, the AIFC-Incorporated Takaful Operator must use the credit rating that results in the highest capital charge.
(3) An AIFC-Incorporated Takaful Operator must not use the rating of an agency that is not in table A unless the AIFC-Incorporated Takaful Operator has the written permission of the AFSA.