Q&A

Question

There is a requirement that allocation of CIC to investments should be in line with the underlying risk. Previously, definition of government bonds included "assets issued by explictly guaranteed by government bonds" but this was subsequently removed.

Based on the current definition of government provided in the CIC definition, bonds issued by agencies, for example, fannie Mae and Freddie Mac would be treated as corporate bonds even where they are explictly guaranteed by the government. This would not be in line with principle of allocating CIC based on underlying risk.

Could you please confirm what is the final position of EIOPA iro treatment of securities issued by corporation or agencies (Freddie Mac/Fannie Mae) that are explictly guaranteed by the government.

EIOPA answer

The situation has been clarified in the final annex: government bonds are bonds issued by public authorities, whether by central governments supra-national government institutions, regional governments or local authorities local authorities and bonds that are fully, unconditionally and irrevocably guaranteed by the European Central Bank, Member States' central government and central banks denominated and funded in the domestic currency of that central government and the central bank, multilateral development banks referred to in paragraph 2 of Article 117 of Regulation (EU) No 575/2013 or international organisations referred to in Article 118 of Regulation (EU) No 575/2013, where the guarantee meets the requirements set out in Article 215 of Delegated Regulation 2015/35.

Regarding bonds with a qualifying guarantee, the third and fourth position shall be attributed by reference to the entity providing the guarantee.