Question ID: 1590
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 176, 215
Status: Final
Date of submission: 10 Jul 2018
Question
With regards to the the Commission Delegated Regulation EU/2015/35 of October 2014 (Solvency ii). I have a question with regards to the treatment of financial guarantees as a risk mitigating technique.
Could you please help me in understanding the treatment of risk for the following example:
1. An investor holds an unrated loan which should bear a Spread SCR according to Article 176 point 4.
2. However, an insurance company has written a guarantee to the holder of the loan which meets all the conditions in Article 215
Could you please confirm whether the capital that should be held should hence be reflective of Spread SCR based on the guarantor's rating or that there is no market risk because of the guarantee and hence only Type1 Counterparty Risk against the guarantor.
EIOPA answer
A guarantee by an insurance undertaking is not taken into account when determining the treatment of a loan for which a credit assessment by a nominated ECAI is not available in the determination of the capital requirement for spread risk. This is irrespective of whether the conditions of Article 215 of Commission Delegated Regulation (EU) 2015/35 are met or not.