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The KID for PRIIPs – more than just a piece of paper

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Presentation on theme: "The KID for PRIIPs – more than just a piece of paper"— Presentation transcript:

1 The KID for PRIIPs – more than just a piece of paper
Dieter Pscheidl Head of European Affairs Vienna Insurance Group (VIG) Croatian Insurance Days 2016 Opatija, 10 November 2016

2 50 insurance companies in 25 countries

3 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

4 What is a Packaged Retail and Insurance-Based Investment Product (PRIIP)?1
Life insurance with European and national carve-outs Scope2 PRIIP = insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations non-life insurance products3 pure risk life insurance products occupational pension schemes4 individual pension products with financial contributions from the employer and without choice of product /provider pension products recognised under national law Aussendung an Juristenkomitee am 1 Regulation (EU) No. 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) 2 Art 2 para 17 and Regulation (EU) No. 1286/2014 Art 4 para 3 3 Classes of non-life insurance as listed in Annex I to Directive 2009/138/EC 4 Occupational pension schemes falling under the scope of Directive 2003/41/EC (IORP) or Directive 2009/138/EC (Solvency II)

5 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

6 Why do consumers need a Key Information Document (KID)?
Standard comparison of insurance, banking and investment products unit-linked life insurance some pension products Insurance Asset management Banking all investment funds closed/open ended structured deposits (UCITS)1 instruments by SPVs structured deposits derivative instruments KID Aussendung an Juristenkomitee am Product comparison for retail investors via precontractual, standardised and non-personalised KID European retail investor market: 10 trillion Euro2 1 Art 32: Management and investment companies selling UCITS will have to comply with the PRIIPS Regulation from 1 January 2020 2 European Commission Press Release IP/12/736 of 3 July 2012

7 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

8 When do we have to be ready?
New timelines on national and European level Publication in the Official Journal of the European Union ? New application date Original application date Level 1: Direct application of the regulation in all Member States European Commission decides on new application date Level 2: Delegated Regulation (= details1) from the European Commission European Commission presents Delegated Regulation European Parliament objects Delegated Regulation Q1 2017 European Commission presents a new Delegated Regulation; scrutiny by European Parliament and Council: months Q No objection: Legal certainty for Delegated Regulation Aussendung an Juristenkomitee am 1 Details such as calculation methodologies and presentation formats

9 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

10 What do we have to do? The KID lifecycle
Dissemination4 free of charge in good time before the conclusion of the contract or any offer, except for distance selling paperless KIDs upon agreement of the customer Review5 on a regular basis throughout the whole lifecycle of the PRIIP Publication3 on own website (as long as the product is traded incl. the secondary market) Drawing up the KID according to the mandatory template1 Ex ante notification2 to the supervisory authority if required by the Member State Aussendung an Juristenkomitee am 1 Art 6ff and Regulatory Technical Standards in the form of a Delegated Regulation 2 Art 5 para 2 3 Art 14 4 Art 13 and 14 5 Art 10

11 External fund suppliers
Who should be involved? Coordination of all stakeholders KID Distributors External fund suppliers IT Actuaries Legal/ Compliance Product Management National supervisor National association Aussendung an Juristenkomitee am

12 Drawing up the KID Restricted design options
Corporate branding or logos shall not distract the retail investor from the information contained in the document or obscure the text Key Information Document This document provides you with key information about this investment product. It is not marketing material. The information is required by law to help you understand the nature, risks, costs and potential gains and losses of this product and to help you compare it with other products. Font size using characters of readable size Language clear and easy to read - no „actuarial jargon“; official language of the retail investor‘s Member State Aussendung an Juristenkomitee am Colours shall not diminish the comprehensibility of the document if the KID is then photocopied or printed in black and white Length maximum of three sides of A4-sized paper when printed

13 Mandatory template (1/3)
Fixed information elements and wordings Title “Key Information Document” Explanatory statement “This document provides you …” Key Information Document PRIIP name This document provides you with key information about this investment product. It is not marketing material. The information is required by law to help you understand the nature, risks, costs and potential gains and losses of this product and to help you compare it with other products. PRIIP ISIN or any other universal identifier, where available PRIIP manufacturer legal name and contact details incl. website Competent authority name and Member State of the competent authority of the PRIIP manufacturer Aussendung an Juristenkomitee am Date of production and of any subsequent revision Comprehension alert1 “You are about to purchase a product that is not simple and may be difficult to understand” 1 Recital 13 and Art 33 - Guidance by national competent authorities required

14 Mandatory template (2/3)
Fixed section order, titles and indicators What is this product? type objectives retail investor target group, but not target market1 insurance benefits if available – insurer’s USP! term What is this product? What are the risks and what could I get in return? What happens if the PRIIP manufacturer is unable to pay out? What are the risks and what could I get in return? risk and reward profile including a summary risk indicator (SRI) combining market and credit risk possible maximum loss of invested capital capital guarantees four performance scenarios for survival (stress, unfavourable, moderate, favourable) and death for 1, 3 and 5 years Aussendung an Juristenkomitee am What happens if the PRIIP manufacturer is unable to pay out? investor compensation or guarantee schemes risks covered 1 Final Report on Public Consultation on Preparatory Guidelines on product oversight and governance arrangements by insurance undertakings and insurance distributors, 6 April 2016 EIOPA-BoS

15 Mandatory template (3/3)
Fixed section order and titles What are the costs? total costs by summary cost indicator for different holding periods (reduction in yield + absolute amount) composition of costs: one-off (entry & exit), recurring, incidental; biometric risk premium ≠ cost What are the costs? How long should I hold it and can I take money out early? How can I complain? Other relevant information How long should I hold it and can I take money out early? cancellation period recommended or required minimum holding period ability and conditions of disinvestments before maturity potential consequences of early cashing in How can I complain? detailed directions on how and where to lodge a complaint about the product and/or the manufacturer’s/distributor’s conduct1 Aussendung an Juristenkomitee am Other relevant information cross-references to any additional information documents (e.g. prospectus, KIID for UCITS², not marketing material) 1 EIOPA Guidelines on complaints-handling by insurance undertakings, EIOPA-BoS-12/069, 14 June Art 32: Management and investment companies selling UCITS will have to comply with the PRIIPS Regulation from 1 January 2020

16 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

17 Open questions Only a few will be answered by the delegated regulation in Q1/ Pre-Sale After-Sale Sale Which products qualify as PRIIP (incl.existing/new)? How and when to distribute the KID (offline/online)? Extent of civil liability for KID producers? KIDs also for underlying investment options (funds)? DR Impact of the KID structure on aggregator websites? Relationship with national information documents? Calculation of summary cost/risk indicator and performance? DR Impact of the KID structure on product design (biometric risk)? Confirmation of receipt by the customer? Aussendung an Juristenkomitee am Use of the comprehension alert for complex products? DR Time to read and consider - two phase sales process? Frequency for the update of the KID? DR Delegated Regulation

18 inhouse implementation
The KID for PRIIPs – more than just a piece of paper Agenda PRIIPs definition inhouse implementation sanctions timeline regulatory objective open questions

19 What happens if we donꞌt comply?
Financial, business and reputational risks Systemic liability towards policyholders2 if the KID is misleading, inaccurate or inconsistent with legally binding (pre-) contractual documents or with the requirements of the KID Administrative sanctions public warnings by the national supervisory authority product intervention by the national supervisory authority: prohibiting or suspending the marketing of a PRIIP3 Administrative fines of up to 5 mn Euro or 3% of the total annual turnover of the ultimate parent undertaking Sanctions1 Aussendung an Juristenkomitee am 1 Art 22ff 2 Art 12: No liability towards the beneficiary 3 Commission Delegated Regulation (EU) 2016/1904 supplementing Regulation (EU) No 1286/2014 with regard to product intervention

20 Q & A Dieter Pscheidl Head of European Affairs Vienna Insurance Group (VIG) Direct line: + 43 (0) – © VIG Reproduction in whole or in part of the content of this presentation are made with the consent of the VIG and must be clearly attributed to the VIG. Check against delivery.

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