On 5 December 2023, the European Supervisory Authorities updated their consolidated questions and answers on the PRIIPs key information document.
These sections of the Q&As have been updated with answers to the following questions:
- General topics:
- If a product, linked to a single ISIN code, is available in both the single and recurring premium versions, it is possible to provide a representation of the riskier version of the two by reporting in the other relevant information section the possibility of purchasing the other version of the product?
- Market risk assessment – product categories:
- Could you confirm if products with recurring premiums are to be modelled as Category 2 PRIIPs or Category 3 PRIIPs? Our opinion is that they should be modelled as category 3 because their performance does not depend only on the performance of the underlying at RHP. However, in the case in which a manufacturer shall produce KIDs for PRIIPs available as both single and recurring premium versions, it may lead to KIDs that are not comparable, mainly given to modelling assumptions (for example, the different lengths of the data series for Category 2 and 3 PRIIPs).
- Performance scenarios:
- In life annuities, should the sum of rents paid up to the period be considered in the minimum scenario?
- Could you confirm that for what concerns the calculation of performance scenarios, as specified in Annex IV, point 7, the manufacturer must always use monthly data even if the NAV is available at higher frequencies (i.e., daily or weekly)?
- In Annex IV, Case 3 for PRIIPs referred to in point 1 of Annex VIII without sufficient historical data and with no benchmark, or with a benchmark without sufficient historical data, or any other Category 2 PRIIPs. In point 13 it is said to use a benchmark regulated by Regulation (EU) 2016/1011 of the European Parliament and of the Council. Is not that a contradiction? In point 15 it is said that in the case in which there is not an appropriate benchmark or proxy with sufficient historical data which meets the criteria set out in point 5 of this Annex for the PRIIP, performance scenarios shall be calculated in accordance with points 21 to 27 of this Annex using 15 years of historical returns of the PRIIP or an appropriate benchmark or proxy.
- Does that mean we are to treat the PRIIP as a Category 3 product?
- It seems contradictory that the regulation is asking to calculate performance scenarios in accordance with points 21 to 27 with 15 years of historical returns, when we have not been able to obtain 10 years historical data, either from the actual product or its appropriate benchmark
- If we do not have sufficient data to meet the amended performance scenario calculations, may we treat the PRIIP as Category 1 according to the definition in Annex II, point 4(c). Accordingly, its Moderate, Favourable and Unfavourable performance scenarios should be “reasonable and conservative best estimates of the expected values”. If yes, we would like to clarify if the SRI calculation should be set at a “6” in the case where the product may have sufficient data for SRI calculation (e.g., 5 years monthly), but insufficient data for performance scenario calculation (e.g., 10 years historical returns not available).
- Multi-option products:
- Could you confirm if manufacturers of insurance-based investment products are allowed to signpost to KIDs produced by fund managers instead of proper SIDs in their IBIP MOPs? What happens when the RHP of the insurance product is not compatible with the RHP of the underlying fund?
- Investment funds:
- In the case of an investment fund (UCITS or AIF), can the manufacturer of the PRIP be an entity to which collective portfolio management functions, or other functions, have been delegated to by the fund or by the management company (manager) or alternative investment fund manager of the fund (those entities to which functions have been delegated might, for example, be referred to as the fund promoter, sponsor, etc.)?