Definition of guarantees: The definition of guarantees used in S.03.01 is identical to the definition of a ‘financial guarantee’ in IAS 39. Are only financial guarantees relevant for QRT S.03.01 that require a payment if the guarantee fails to make payments for a debt instrument when due or have non-financial guarantees (e.g. indemnifications or performance guarantees) also to be included in QRT S.03.01?

EIOPA answer

Not only financial guarantees are to be included in S.03.01. The guarantees included can have various legal forms, such as financial guarantees, letters of credit, credit default contracts and they should require the issuer to make specified payments to reimburse the holder for a loss it incurs if a specified debtor fails to make payment when due under the original or modified terms of a debt instrument. These items shall not include guarantees stemming from insurance contracts, which are recognised in technical provisions.

Regarding letters of credit that could qualify for AOF undertakings should carefully assess whether to recognise the corresponding contingent liability as a liability in compliance with Article 11 of Delegated Regulation (EU) 2015/35 (see Guieline 8 of EIOPA Guidelines on recognition and valuation of assets and liabilities other than technical provisions). If it is recognised as a contingent liability then it should be reported in S.03.01 but only in R0330.