Question ID: 1392
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 5
Status: Final
Date of submission: 14 Nov 2017
Question
I am looking for a bit of clarity on the language in Article 5, Issuers and issue credit assessments. In point 2. it states that in the case where a bond is unrated but an "issuer rating" exists for that issuer or for a specific program which this bond is not a part of then one can follow a or b.
It then in point 3. states that Credit assessments for issuers within a corporate group shall not be used.
In the case where a rated parent in the same corporate group who fully guarantees a particular unrated issuance from a subsidary (which is pari passu to the parent's senior bonds), would this unrated bond be able to use the one of the guarantor?
If not does this mean that even with a guarantee the bond would receive a spread risk charge for an unrated undertaking?
EIOPA answer
The described guarantee by the rated parent in the same corporate group should not be taken into account for the determination of the credit quality step in accordance with Article 5 of the Delegated Regulation. If the provisions set out in Article Par. 1 or the first part of Par. 2 are not met, the insurance or reinsurance undertaking should indeed consider that there is no credit assessment by a nominated ECAI available for the bond.