ESMA registers A.M. Best (EU) Rating Services B.V. as credit rating agency

On 3 December 2018, the European Securities and Markets Authority (ESMA), the EU’s direct supervisor of credit rating agencies (CRAs), registered A.M. Best (EU) Rating Services B.V. as a CRA under the CRA Regulation.

The registration takes effect from today 3 December 2018. A.M. Best (EU) Rating Services B.V. is based in the Netherlands and intends to issue corporate ratings for insurance undertakings and corporate issuers that are not considered a financial institution or an insurance undertaking.

The CRA Regulation seeks to ensure that credit ratings issued in the EU meet minimum standards of quality, transparency and independence by providing that only companies registered by ESMA as CRAs may lawfully issue credit ratings which can be used for regulatory purposes by credit institutions, investment firms, insurance and reinsurance undertakings, institutions for occupational retirement provision, management companies, investment companies, alternative investment fund managers and central counterparties.

In order to be registered as a CRA, a company must be able to demonstrate to ESMA that it complies with the requirements of the CRA Regulation, which covers inter alia:

• the governance of CRAs and the management of conflicts of interest;
• the development and application of methodologies for assessing credit risk; and
• the disclosure of information to ESMA and to market participants.

Once registered, CRAs are subject to on-going monitoring and supervision by ESMA to ensure that they continue to meet the conditions for registration. ESMA will impose sanctions and/or penalties where it finds that a CRA has failed to meet its obligations under the CRA Regulation. The total number of CRAs registered in the EU is 27 CRAs. Amongst the 27 registered CRAs, three operate under a group structure, totalling 17 legal entities in the EU, which means that the total number of CRA entities registered in the EU is 41.