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Packaged Retail and Insurance-Based Investment Products (PRIIPs)

Packaged Retail and Insurance-Based Investment Products (PRIIPs)

Willis Towers Watson has been working with a variety of companies across the EU and beyond on their PRIIPs KIDs. Whilst we are still receiving enquiries for new KIDs, for our existing clients we are now moving into monitoring performance in order to satisfy Article 15 of the RTS. We would also be very happy to advise new clients on compliance in this area.

LATEST NEWS: The UK's FCA has invited firms and consumers to provide input on their initial experiences of the requirements introduced by the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and have produced a short report which sets out the questions. The FCA page contains some timescales for the exercise.

What is PRIIPs?

The legislation applies to any product which satisfies the definition of a PRIIP.

A PRIIP is defined as ‘investments…where the amount repayable to a retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor’. This includes ‘insurance based investment products’ that are ‘insurance products, offer a maturity or surrender value that is wholly or partially exposed, directly or indirectly, to market fluctuations.'

Products covered
Structured instruments
Non-UCITS unitised funds
Hedge funds
Unit-linked insurance policies
Participating insurance*

*Such as 'with-profits' business in the UK and Ireland or 'traditional' business in some other markets.

Products not covered
Occupational pensions
Non-life insurance (for example motor)
Term assurance
UCITS (given a two-year delay in implementation)
Direct investments/Bank deposits (linked to interest rates)

Why this should be in your agenda

From 1 January 2018, a Key Information Document (KID) is required for virtually all investment products (including insurance savings and probably excluding most pension products), although UCITS products should have a two-year derogation.

There is significant work and complex calculations needed to prepare a KID, particularly in the areas of categorising products and determining the risks and rewards for policyholders and investors.

From 1 January 2018, this needs to be carried over into constant monitoring processes and BAU processes to revise and update the KID as required. See the RTS, Article 15.

Insurers, fund managers and product providers need to prepare now for the new regime and "PRIIP manufacturers shall establish and maintain adequate processes throughout the life of the PRIIP where it remains available to retail investors to identify without undue delay any circumstances which might result in a change that affects or is likely to affect the accuracy, fairness or clarity of the information contained in the Key Information Document". 

This statement from the FCA relates to concerns raised about the performance scenarios in the KID. 

Who should act?

  • Actuaries working in new business areas
  • Compliance
  • IT systems managers involved in new sales activities and the corporate website

How Willis Towers Watson can help you

Willis Towers Watson offers a tailor-made service to fit the needs of the client. So far, this has ranged from simple input with scoping and categorisation, all the way to complete outsourcing. Particular areas of challenge are:

  • Categorisation of funds/products
  • Capture and analysis of fund/investment and expenses data
  • Handling of the more challenging products such as participating business, structured products and products with limited history
  • PCA for bond investments
  • Finding appropriate simplifications
  • Doing the calculations for MRM, performance and expenses
  • Automating the end-to-end process to assure a robust, efficient and timely KID production process

Through our international network and daily discussions with clients, we are able to leverage experience and ideas from across the EU to produce efficient solutions.

For further information, please contact your Willis Towers Watson consultant or Steve Hardwick, who will be able to refer you to an expert in your area.

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