Further, in Canada, asset default factors for preferred shares, where rated, are based on the rating agency grade. For financial leases where rated, and the lease is also secured by the general credit of the lessee, the asset default factor is based on the rating agency grade. Other examples of the use of credit ratings in LRSPs governing capital requirements are found in Japan, where credit ratings issued by DRAs are used to calculate the solvency margin ratios regarding estimating credit risks for insurance companies, 19 and Australia, where prudential standards for both general insurers and life insurers use credit.
