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.
Keywords: Europe, EU, Banking, Insurance, Securities, Pension Funds, KID, IBIPs, PRIIPs, ESAs, EIOPA
Previous ArticleHKMA Publishes Banking Securitization Code Under Banking Ordinance
PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.
SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.
EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.
US Agencies (FDIC, FED, and OCC) issued a joint statement encouraging banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, to facilitate an orderly LIBOR transition.
The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system.
HM Treasury extended the consultation period on Phase II of the Future Regulatory Framework (FRF) Review, from January 19, 2021 to February 19, 2021.
ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.
BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.
PRA published the policy statement PS23/20 on the calculation of stressed value at risk (sVAR) and risks not in value at risk (RNIV) under the market risk framework.
BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.