Question ID: 1793
Regulation Reference: (EU) No 2009/138 - Solvency II Directive (Insurance and Reinsurance)
Article: 35
Template: S.06.02
Status: Final
Date of submission: 14 Feb 2019
Question
Some of our clients ask us about our interpretation of the proper treatment of notes issued by SPVs and collateralized by government bonds concerning the QRT S.06.02 ( C0290 / CIC code and C0340 / Credit quality step)
C0290 / CIC code
What would be the appropriate CIC code? Government Bond '11' ,Other corporate bond '29' or IR risk structured product '52' ?
The question comes because the definition of CIC code 5 specifies : "Excluded from this category are fixed income securities that are issued by sovereign governments".
As fixed income securities issued by sovereign governments are not structured notes, we wonder if we are speaking here about the fixed income collateral
C0340 / Credit quality step
Can such unrated notes, inherit the collateral CQS?
EIOPA answer
Notes issued by SPVs and collateralized by government bonds are to be reported in S.06.02.C0290 with a CIC code 6 "Collateralised securities". Depending on the major risk associated with the Tranche, it would most probably be CIC 62 (IR risk) or CIC 64 (credit risk). Please note that in your example the notes are issued by the SPVs and not by sovereign governments.
Such unrated notes cannot inherit the collateral CQS.