January 11, 2019

EIOPA published its first report on costs and past performance of insurance and pension products following an EC request (as part of the implementation of its Capital Market Union Action Plan) to ESAs to periodically report on costs and past performance of retail investment, insurance, and pension products. As part of this request, EBA also published a similar report on structured deposits while ESMA published a similar report on retail investment products covering Undertakings for Collective Investment in Transferable Securities (UCITS), Alternative Investment Funds sold to retail investors (retail AIFs), and Structured Retail Products (SRPs).

The EIOPA report provides aggregate data on the costs of insurance-based investment products (IBIPs) across the European Union as well as for certain similar personal pension products (PPPs) and sets out the net performance for the period between 2013 and 2017. It is based on data derived from Key Information Documents (KIDs). On past performance, insufficient data is available from market providers; therefore, EIOPA requested additional data from insurance undertakings. Similar requests were necessary for personal pension products.

The report shows that costs vary depending on the type of product, premium, risk category, and jurisdiction. Variations in asset management costs related to different risk categories are a major factor. The report concludes that, due to the differences between products, there are significant challenges with comparing performance—for example, in view of the values of guarantees, the impact of smoothing mechanisms and terminal bonuses of profit participation products, and the impact of risk and volatility. This analysis is a pilot exercise. Given data and comparability limitations, a significant portion of the sample could not be used and, consequently, market coverage is limited. To address these issues, EIOPA will further develop common definitions of costs and common methods for calculation of past performance, especially for profit participation products.

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Keywords: Europe, EU, Banking, Insurance, Securities, Pension Funds, KID, IBIPs, PRIIPs, ESAs, EIOPA