It’s now almost a decade since the European Commission began thinking in 2007 about a way to present the features of complex investment products to retail investors in a clear, concise and non-misleading way. That initiative led to the introduction of the Key Investor Information Document (KIID) for funds through the UCITS IV directive. However, European policy-makers wanted to extend the idea to other types of investment to enable investors to compare them.

The result is the Key Information document (KID) created by EU Regulation 1286/2014 on Packaged Retail and Insurance-Based Investment Products (PRIIPs). Although similar in its presentation to the UCITS KIID, the information contained in the PRIIPS KID is very different in approach, prompting the fund industry to obtain a ‘grandfathering’ period during which it could retain the (itself recently-introduced) KIID before having to switch to the KID.

Along with other providers of retail investment products, insurers were originally required to implement the regulation by 1 January 2017. However, in response to industry criticism, the European Parliament called on the Commission to revise details of how the regulation is to be put into effect, resulting in a decision to delay its application until the beginning of 2018.

PRIIPs distinguishes between two models, the single investment option and the multiple investment option (sometimes referred to as MOP). The MOP approach will apply to products such as those offered by OneLife, which can include a combination of external and internal funds (collective, dedicated and model portfolio).

This involves a two-level KID – one for the contract and one for each of the various investment options. Because PRIIPs requires full transparency, asset managers will be asked to provide standardised investment models that use or reference a benchmark. This approach will be followed by all Insurers in Luxembourg.

In addition, asset managers will be requested to provide information to enable the calculation of performance scenarios. Asset managers working with OneLife are already familiar with the KIID approach that we implemented more than three years ago, confirming the wisdom of our choice of strategy at the time.

We have also joined forces with Lombard International Assurance and ABN AMRO Life to share resources and avoid the need for asset managers and custodian banks to provide the same information several times, and the three companies will draw on the expertise of KNEIP Communication for KID production.

We will soon contact our asset managers and custodian banks to ensure they understand the challenges of the new regulation and what the insurance companies expect from them. OneLife is committed to assisting its partners to meet this challenge, which represents a step change in the way financial products are marketed to retail clients.

>>> For more information on PRIIPS please contact our Tax and Legal specialists here. 

>>> This article is part of the November 2016 edition of our monthly newsletter Life Insights. Click here to subscribe.