PRIIPs Regulation's implementation date
approaching—31 December 2016—there are still some
questions unanswered for the insurance industry. Specifically,
doubts have arisen regarding the
existing portfolio of contracts that will be still in force on 1
January 2017. In this article, we will aim to shed some light on
the debate surrounding this issue.
The main question posed by the market players affected by PRIIPs
is very often linked to legacy: do manufacturers need to
provide a KID to investors who signed contracts before 1 January
2017 that are still in force? Considering the pre-contractual
nature of the KID, would it be reasonable to assume they do? Taking
into account the considerable number of existing contracts held by
many stakeholders (more than 20,000 in some cases), these seem to
be very pertinent questions.
The PRIIPs Regulation does not contain a clause on
grandfathering, and the draft RTS admits to multiple
interpretations of how to approach these existing contracts. This
ambiguity raises debate on which path the industry should take to
be fully compliant and, more importantly, to have the means and
resources to even be able to be fully compliant.
At the ESAs Public Hearing on PRIIPs on 9 December 2015, EIOPA
mentioned that the Regulation did not make any reference to
grandfathering, and therefore they could not confirm that older
contracts were excluded. At the same conference, the ESAs asked
market players to collaborate in providing information on the
impact that the absence of grandfathering provisions would have on
their business. Therefore, the existence (or not) of grandfathering
rules is still under the ESAs' consideration, and, we hope,
will be included in the texts the industry is currently expecting
(which, at the time of this present article's publication, are
Amidst such uncertainty, the industry did receive a
clarification on the treatment of PRIIPs traded on secondary
markets. In a letter sent by the European Commission to several
industry groups on 17 February 2016, the European Commission
expressly stated that, with regards to PRIIPs offered prior to 1
January 2017 that are traded on secondary markets, the PRIIPs
Regulation does not provide any grandfathering provisions and
therefore all PRIIPs in this category are under scope regardless of
whether they are new or previously existing.
When the ESAs were asked (at the aforementioned conference)
about their approach in cases where the manufacturer was in run-off
(i.e. where it does not sell new products but manages the existing
book only), they answered that PRIIPs Regulation would not apply in
such cases. This approach mirrors the UCITS KIID regime for
companies in liquidation established in the ESMA Q&A of
September 2012. Nevertheless, a case-by-case analysis would be
The above clarification may be useful to a certain extent: the
debate on the existing PRIIPs not traded on secondary markets is
still open and the coverage of such products by the Regulation
Industry members weigh in
The ambiguity of the Regulation makes the industry wonder: how
should I approach my existing business? PRIIPs manufacturers claim
that a grandfathering clause would release them from producing the
KIDs for a considerably large number of contracts, and that this
would entail a wide range of advantages:
lower costs and less time to implement the Regulation
more certainty that the application deadline will be met (which
is another controversial topic surrounding PRIIPs)
fewer human and technical resources dedicated to the KID
fewer legacy issues, as non-digitalised contracts are difficult
to adapt for the new framework
easier and cleaner communication mechanisms possible with
clients, since a specific PRIIPs-compliant selling/distribution
process could be set up for new business from 1 January 2017
stricter compliance with the pre-contractual nature of the KID
under the PRIIPs Regulation: since the investors in the contracts
forming part of the existing portfolio will already have taken a
decision on which product to buy, the pre-contractual objective
cannot be achieved.
Nevertheless, several stakeholders also argue that the PRIIPs
Regulation's consumer protection objectives would not be
achieved by the addition of a grandfathering clause, in the sense
that the documentation consumers will get would be less detailed
with regards to the product they bought.
Understanding how the PRIIPs Regulation applies to legacy
contracts is a key milestone in the application of the Regulation
and a key challenge facing industry players in the absence of
clearer indications from the ESAs.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The SuperReturn International series consists of 15 annual international private equity & venture capital events held in Europe, Asia, Africa, Middle East and the US. This happens to be the European event for the year. Spread across five days, starting from 27 February, the largest private equity event worldwide will take place in Berlin this year.
Some of the main subjects being discussed at this year’s conference are; The Geopolitical and Economical happenings of the last 12 months, Innovation Disruption & Tech Expertise and many more. As previously eluded to, there will be over 400 presenters, all bringing their own perspective and stance on specific topics to the table. Companies such as Google, Visa, Bloomberg and many more will all be represented throughout the five days.
KPMG Associate Partner, Nic Müller, will be speaking on 28 February at 3pm: “Why invest in the mid-market today”.
Given the societal challenges and environmental issues we currently face, the circular economy concept has rapidly been gaining in importance. This is why the Luxembourg government is pressing ahead in setting up the framework for the third industrial revolution, in which a circular economy is a key pillar.
The International Accounting Standards Board’s (IASB) insurance contracts standard, IFRS 17, is expected to significantly affect data requirements and the systems and processes used for data collection, actuarial projections, and on calculating and accruing interest.
In discussion with insurers around the world, we found that most expect to face challenges accessing and handling data of the right quality and granularity under the new standard. And many see significant effort associated with capturing, storing and analyzing this information given historical data quality and the use of legacy systems.
In the third of our webcast series - Impacts of IFRS 17 on data, systems and processes - we will share practical examples of how the forthcoming standard may impact an insurer’s current systems architecture. In addition, we will explore the data that will be required and how the standard will influence new estimates, computations and processing. We will also share lessons that we have learned from helping insurers through Solvency ll and the importance of developing a data management policy early on.
The Ministry of Financial Services, Commerce and Environment has prepared 11 bills to strengthen Cayman's regulatory framework, introduce new financial services vehicles, and improve the local business environment.
Over 150 attendees from both New York and the Cayman Islands recently gathered at the 4th annual Cayman Finance New York Breakfast Briefing held at the Harvard Club of New York City at which Cayman Finance CEO Mr Jude Scott described Cayman as "the premier global financial hub".
This article will explore existing real estate property management solutions, focusing on the top private equity real estate platforms in the marketplace, including subject matter expert's viewpoints on the existing software infrastructure.
Of those assets there is a wide range, including hedge funds, private equity, debt and property funds.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).