- 2'30 min
The PRIIPS Regulation will apply to life insurance from 1st january 2018
After being postponed, the PRIIPs Regulation on the new key information documents for packaged investment products is expected to finally apply to unit-linked life insurance contracts from 1st January 2018.
How does the PRIIPs regulation affect the life insurance sector?
The European PRIIPs Regulation (Packaged Retail and Insurance-based Investment Products) was adopted by the European Parliament on 26 November 2014. It aims to give savers better information and protection by providing them, prior to the transaction being concluded, with a key information document (KID) on the relevant packaged retail and insurance-based product.
In practical terms, the products concerned by the PRIIPs Regulation are investment or insurance products aimed at retail investors and whose performance depends, directly or indirectly, partially or totally, on fluctuations in the market. Unit-linked life insurance policies are therefore included. Pension products are excluded.
PRIIPs : Packaged Retail and Insurance-based Investment Products
No PRIIPs Regulation without Regulatory Technical Standards…
Even if, as a European Regulation, the PRIIPs Regulation is in principle directly and immediately applicable in French law, in practice it requires the adoption of a Delegated Regulation containing the Regulatory Technical Standards (RTS) setting out the information required in KIDs.
A first draft RTS was approved by the European Commission in June 2016, but it was rejected by the European Parliament in September, to the great relief of life insurance professionals, who had mobilised strongly against these standards which drew strong criticism not only for their complexity, but also for the cost and volume of the documentation to be produced, and the deadline for their implementation. For the FFA (French Insurance Federation), as they stood these standards amounted "to providing savers with opaque and misleading information that did anything but protect them".* Among the subjects that aroused strong opposition was the obligation to provide, from 31 December 2016, a KID for each underlying investment option in the same product, which would have meant, for life insurance contracts, that a PRIIPs-format KID would have to be drawn up for each unit, namely tens or even hundreds of KIDs depending on the contract.
The final instalment in the saga of the adoption of the PRIIPs Regulation?
Finally, the application of the PRIIPs Regulation, originally scheduled for 31 December 2016, was postponed and on 8 March 2017 the Commission adopted an amended Delegated Regulation. The rewriting of the RTS particularly concerns PRIIPs with multiple investment options, the presentation of the performance scenarios, the presentation of costs and a comprehension alert on the complexity of products.
This time, the amended RTS should normally be adopted by the European Parliament and come into force on 1st January 2018. As far as unit-linked life insurance contracts are concerned, these should be able to continue using the current French standard information document (DICI) until 31 December 2019 where at least one of the units in the unit-linked contract is a fund that has such a DICI.
Sources : Règlement (UE) PRIIPs n° 1286/2014 - Projet de règlement délégué de la Commission du 8 mars 2017FFA