On 20 February 2018, the Austrian Financial Market Authority (FMA) published a new circular concerning key information documents for packaged retail and insurance-based investment products. The circular is available only in German on the FMA homepage.
Circular on PRIIPs
The circular is addressed to insurance undertakings and entities that produce, sell or advise on insurance-based investment products.
In the following, we have summarised the most important interpretations by the FMA of Regulation (EU) 1286/2014 ("PRIIPs Regulation"):
- In case of mixed endowment and death insurance, the key information document ("KID") has to outline both components (death and endowment insurance), although classical death insurance is not subject to the PRIIPs Regulation.
- Immediately starting annuity insurances do not fall within the scope of the PRIIPs Regulation and hence no KID must be produced. Deferred annuity policies are subject to the KID requirement, although the presentation of the performance scenarios may be limited to the savings phase.
- The FMA considers the following individual and occupational pension products outside the scope of the PRIIPs Regulation:
- State-aided pension provision pursuant to § 108g EStG;
- Additional pension insurances pursuant to § 108b EStG;
- Future insurances pursuant to § 3 (1) Z 15 lit a) EStG;
- Occupational pension insurance pursuant to § 93 VAG 2016;
- Pension fund business pursuant to § 1 (2) PKG;
- Pension reinsurance;
- Severance payments cover insurance; and
- Severance payments and anniversary bonus cover insurances.
- Additional insurance sold together with, but not itself qualifying as, insurance-based investment product have to be described in the KID in the "Other relevant information" section.
- If insurance-based products are not offered after 1 January 2018, no KID is required, even if investment options may (continue) to be exercised in the future.
- Even if Annex I of Delegated Regulation (EU) 2017/653 ("PRIIPs DR") does not foresee a separate section for "term", the term of an insurance-based investment product will need to be described in the "What is this product" section.
- Whereas the German text of Annex VI of PRIIPs DR used the term "or", the aggregate costs will need to be presented as a monetary amount and percentage.
- The FMA considers that uniform holding periods will form the basis of the presentation of the recommended holding period for certain product classes. Products with a fixed term will have this fixed term as the recommended holding period.
- If a KID is updated, the FMA considers publication via the webpage of the insurance undertaking sufficient. This is also based on the draft of the Insurance Distribution Act 2017, which prescribes at least annual reporting of certain substantial information to the insured party in paper form or via durable medium.
- The FMA considers that life insurance eligible for profit participation for which a cover pool has been established will constitute a non-complex insurance-based investment product. However, whether all conditions for such qualification pursuant to PRIIPs DR are met will have to be documented by the insurance undertaking on a case-by-case basis.
- Unit-linked and index-linked life insurance for which a cover pool has been established will also constitute a non-complex insurance-based investment product, provided that the underlying financial instruments are non-complex pursuant to MiFID II. Again, whether all conditions for such qualification pursuant to the relevant EIOPA Guidelines (EIOPA-17/651) are met will have to be documented by the insurance undertaking on a case-by-case basis.
- Performance scenarios of products with investment options will be presented in accordance with these investment options. Hence, the requirement to present four performance scenarios in accordance with the PRIIPs Regulation will not apply. In addition, the FMA considers that the generic KID will only need to contain death scenarios.
- Whereas it could be derived from the EBA Guidelines and the available materials that the EBA would prefer that complete neutralisation of certain requirements should no longer be permissible, the FMA continues to consider a complete neutralisation of the requirements of items 11 to 12a of the Annex to § 39b BWG permissible for non-complex institutions. We assume that the FMA bases this on item 49 of the Final Report of the EBA to the EBA Guidelines, in which the EBA expressed its belief that a complete neutralisation of certain requirements should no longer be permissible, but at the same recognised that many Member States consider a complete neutralisation in compliance with Art 92 (2) CRD IV.
- The balance sheet threshold – relevant for determining whether an institution is complex – has been increased from EUR 1 billion to EUR 5 billion.
- It continues to be permissible to neutralise certain requirements for certain classes of employees.
- The materiality threshold for variable remuneration remains at 25 % of fixed income or EUR 30,000. Any amounts exceeding this threshold may not be considered insignificant.