I am writing to follow up on Question ID 3276, submitted on March 3, 2025, concerning the application of guarantor rating in the calculation of the Basic Solvency Capital Requirement (SCR). We seek clarification on whether the guarantor rating can be applied in a specific case. The issuer Company A, a wholly owned subsidiary of Company B, operates as a special purpose vehicle (SPV) with no material assets or business operations, established solely for the purpose of issuing debt on behalf of Company B. Typically, the issue/issuer may or may not possess an independent credit rating. In instances where a rating is assigned, it is common for rating agencies to apply the guarantor's rating to the issue/issuer, based on the concept of credit substitution, due to the presence of a strong irrevocable and unconditional guarantee. In this case, the notes are irrevocably and unconditionally guaranteed by Company B of which the Guarantor holds a credit rating of A+ from Moody’s, S&P, and Fitch. The guarantee has the same seniority as the senior unsecured debt of the guarantor. Both company A and company B are not part of the limited subset of guarantors listed in Article 180(2) and (3b) for spread risk sub-module. Given that the Guarantee’s terms meet the requirements set forth in Articles 209, 210, and 215, we seek confirmation on whether the A+ rating of Company B can be utilized in the calculation of the spread risk and concentration risk SCR for this bond issue. We would greatly appreciate your guidance on this matter and look forward to your response. Thank you for your attention to this inquiry.

The question has been rejected because the issue it deals with is already explained or addressed in Article 5(3) and 215 of Commission Delegated Regulation (EU) 2015/35.

Pursuant Article 215, in the calculation of the Basic Solvency Capital Requirement, guarantees shall only be recognised where explicitly referred to in Chapter V of the Commission Delegated Regulation (EU) 2015/35.

The rating of Company B cannot be utilized in the calculation of the spread and concentration risk SCR for a bond issued by Company A, unless Company B is a counterparty for which an explicit reference is made in Chapter V, such that its guarantees can be taken into account in the calculation of the SCR. This is the case, for instance,  of the guarantors listed in Article 180(2) and (3b).

Moreover, Article 5(3) excludes the possibility to use the credit assessments assigned to one issuer within a corporate group as the credit assessment for another issuer in the same group.

For further clarity on the matter, please refer also to Q&A 1392 and 1590.