The Association of International Life Offices has written to European Insurance and Occupational Pensions Authority expressing concerns at the letter it has sent regarding revisions to the regulatory technical standards (RTS) relating to PRIIPs.
The AILO said in a statement that it is particularly concerned that EIOPA has not highlighted in its recent letter to the EU’s Joint Committee of the European Supervisory Authorities what it believes is an “excess of the powers granted to the ESAs” in their respective founding regulations.
AILO said that Articles 10(a) and 14 remain in the updated version of the controversial PRIIPs document and although amended, are giving the ESAs too much power in such an important decision for the life industry.
Articles 10(a) and 14 states: “Regulatory technical standards shall be technical, shall not imply strategic decisions or policy choices and their content shall be delimited by the legislative acts on which they are based”. AILO maintains that it is “explicitly clear that Article 14 fails to adhere to these legislative limitations upon the regulator’s powers.
In respect of the actual RTS and proposed amendments, such as to the Multiple Option Products (MOPS), AILO notes that while it is now proposed to permit sign posting, despite the Level 1 text wording, this would apply only to UCITs and other recognised non UCIT funds.
As a result AILO believes that this would create a “two-tier situation” and, at the same time, add further confusion for product providers, distributors and intermediaries by requiring conflicting cost and performance illustrations.
For example, the PRIIP KID uses reduction in yield presentation while the UCIT KID uses percentage costs. An unintended consequence of this “loose” wording would be to make the MOP provider legally responsible for the information it would have to obtain from fund providers, AILO stated.
The AILO statement read: “While there are some amendments proposed in respect of insurance premium costs, these do not satisfy the industry’s calls for these costs to be totally excluded from the investment costs and shown only in the “what is this product” section of the KID.
“The result again can only be unclear disclosure for consumers and investment costs appearing higher for insurance based products. Equally concerning is the requirement to show an “average insurance cost premium” for a regular premium product in a document which the ESAs have confirmed is non-personalised and yet where premiums may vary with age and other circumstances.”
AILO said that intends to write again to EIOPA with further comments and suggestions for amendments on some technical aspects, including Annex 7 of the RTS and the incompatibility between PRIIPs and UCITs disclosure requirements
“It is AILO’s view that should the PEPPs initiative take off then unquestionably products will be of the MOPs nature, so all the more reason to ensure disclosures which are straightforward to implement by providers and which will result in outcomes that consumers can understand,” the statement concluded.
As reported, the implementation of PRIIPs KID documentation has been delayed until January 2018 following a landmark overturning of the reform following as series of sustained pressure from the life and investment industry to change the way that the documents are worded.