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Packaged Retail and Insurance-Based Investment Products (PRIIPs)

Packaged Retail and Insurance-Based Investment Products (PRIIPs)

In November 2016, the Commission discussed the rejected PRIIPs KID RTS and proposed a 1 year delay to the start-date for both Level 1 and Level 2. This was rushed through Parliament and the Council and passed into law on 24th December. Willis Towers Watson has been monitoring the PRIIPs developments closely and are well positioned to assist you in all areas of the implementation of the PRIIPs regime.

News Update

As a result of the European Parliament’s meeting held on the 14 September 2016, the PRIIPs KID Level 2 Regulatory Technical Standards (RTS) were rejected.

PRIIPs were discussed by the Commission on 9 November 2016 which has now extended the application date of the PRIIPs Regulation by one year to 1st January 2018. Furthermore, on 10 November 2016, they released a draft amendment to the RTS, addressing 3 main elements:

  • Multi-option PRIIPs
  • Adding a 4th “stress scenario” to the existing 3 (unfavourable, moderate and favourable)
  • Biometric risk

This confirmed our earlier expectation of a ‘quick fix’ delay for Level 1 that only addresses the minimum changes demanded by Parliament.

Unfortunately, the ESAs failed to endorse the 10th November revisions to the RTS.

This makes the intended publication of the final RTS by February 2017 challenging.

For further details on the current discussions and potential effects of this decision please contact our team.

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
Direct investments/Bank deposits (linked to interest rates)

Why this should be in your agenda

From 1 January 2018, a Key Information Document (KID) will be required for virtually all investment products (including insurance savings and probably excluding most pension products), although UCITS products should have a 2-year derogation.

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

This needs to be carried over into constant monitoring processes and BAU processes to revise and update the KID as required.

Insurers, fund managers and product providers need to prepare now for the new regime.

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 Portfolio Bonds
  • 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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