Out-Law News | 19 Feb 2019 | 3:11 pm | 1 min. read
To do this, the European Fund and Asset Management Association (EFAMA) and Insurance Europe have asked the EU to temporarily extend elements of the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs Regulation). The extension relates to insurance-based multi-option products. It will allow firms to continue to ‘pass through’ product information for underlying funds prepared under the Undertakings in Collective Investment in Transferable Securities (UCITS) instead of under the requirements in PRIIPS.
The bodies want the extension to last until the temporary exemption of UCITS from the PRIIPs Regulation ends at the end of 2021.
In a joint letter (2 page / 88KB PDF) to the European Insurance and Occupational Pensions Authority (EIOPA), the bodies said that where the underlying funds of an insurance-based product are UCITS funds or other funds where a UCITS key information document (KID) is produced rather than a PRIIPs KID, the PRIIPs rules allow insurers and asset managers to produce a generic PRIIPs KID for the overall product, and to provide investors with the existing UCITS KID for each of the underlying funds.
The rule was drawn up when the EU agreed to temporarily exempt UCITS from the PRIIPs regulation. The original exemption was due to expire in December 2019, but last year the European Commission agreed to extend it by two years.
However the rule governing the use of UCITS KIDs for multi-option products will still expire this year, unless it is also extended.
The two industry bodies said this would create a “significant compliance burden” for insurers and asset managers, as they would need to produce new data to populate the PRIIPs KID.
“In addition, where the data can simply not be produced, the range of products offered to consumers will ultimately decrease,” the letter said.
The bodies said an indication that the European supervisory authorities intended to propose amendments to address the issue, this had to be followed by swift legislative action.
They said amendments to regulatory technical standards needed to be adopted “urgently” by the commission to give the industry certainty that they could continue to use UCITS KIDs for multi-option products sold under PRIIPs until January 2022.
Insurance regulation expert Anita Ives of Pinsent Masons, the law firm behind Out-Law, said: "Whilst UCITS remain exempt from the PRIIPs regulation it makes sense to align the product information exemption with that exemption. Asking product providers to prepare information about UCITS funds under the PRIIPs Regulation would be a considerable additional burden if the extension is not approved. That additional information may also end up being more confusing for retail customers."