Question ID: 3552
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Topic: Solvency Capital Requirement (SCR)
Article: 215
Status: Rejected
Date of submission: 16 Apr 2026
Question
A life insurance undertaking places a term deposit / time deposit with Bank A (i.e. a deposit with a time restriction on withdrawal, therefore treated as “deposit with credit institutions” rather than “cash at bank”). Based on EIOPA Q&A 2278 / 2263 and 1991, we understand such a deposit is generally subject to market risk module, including spread risk and market risk concentration submodules, plus IR/FX where relevant. Assume the deposit exposure to Bank A is fully, unconditionally and irrevocably guaranteed by Bank B, a different credit institution with a higher credit rating, via a legally enforceable guarantee / standby letter of credit that meets the qualitative requirements of Article 215 (direct claim, clearly defined/ incontrovertible coverage, no unilateral cancellation, etc.). We would appreciate clarification on the market risk treatment: 1. Spread risk (Article 176): For a bank deposit “other than cash at bank” included in the scope of Article 176, can the undertaking reflect the third-party bank guarantee by: (a) assigning the credit quality step / stress based on Bank B (guarantor) rather than Bank A; or (b) otherwise recognizing the guarantee as a credit risk mitigant for spread risk somehow? 2. Market risk concentration (Articles 182–187): For the purposes of identifying the single name exposure and calculating the market concentration charge, may the undertaking: (a) attribute the exposure to Bank B (guarantor) instead of Bank A; or (b) must the exposure remain allocated to Bank A (as contractual obligor), with the guarantee only being relevant in the limited cases explicitly stated in Article 187 (e.g. public-sector guarantors in 187(3) and government deposit guarantee schemes for bank deposits in 187(5))? 3. If the answer is that guarantor substitution is not permitted for spread and/or concentration in this scenario, could EIOPA confirm whether this follows from the principle in Article 215 (“guarantees shall only be recognized where explicitly referred to in [the SCR chapter]”), noting that Article 199(10) explicitly allows guarantor substitution for PD assessment under counterparty default risk, but no equivalent explicit substitution rule appears in the spread risk and market concentration provisions for guarantees provided by private credit institutions?
Background of the question
We have reviewed existing EIOPA Q&As on deposit classification and SCR module allocation (notably Q&A 2278, 2263, and 1991) which indicate that deposits with a time restriction on withdrawal are treated under spread risk + market concentration (and other relevant market risk sub-modules) rather than solely counterparty default risk. We also note that EIOPA has taken a restrictive approach to recognizing guarantees for spread risk in at least some contexts (e.g. Q&A 1590 for an unrated loan), and that Article 187 provides explicit guarantee recognition only for certain categories (e.g. 187(3) public/IFI guarantors; 187(5) government deposit guarantee schemes). However, we have not found an EIOPA Q&A that directly addresses a deposit with a credit institution guaranteed by another (higher rated) credit institution and whether this can affect the spread risk stress / credit quality step and/or the single name exposure attribution in the market concentration sub-module. Accordingly, we request EIOPA’s interpretation on whether (and if so, how) the above private bank guarantee can be recognized in spread risk and market risk concentration calculations.
EIOPA answer
The question has been rejected because the issue it deals with is already explained or addressed in Article 215 of Commission Delegated Regulation (EU) 2015/35 and in Q&A 3381 and 3276.
Pursuant to Article 215 guarantees cannot be recognised in the standard formula unless they are explicitly referred to in Title I Chapter V “Solvency capital requirement standard formula” of Commission Delegated Regulation (EU) 2015/35.