A BEACON IN THE FOG: THE EUROPEAN PRIIPS TEMPLATE
Asset managers and insurers have agreed upon a European PRIIPs template (EPT) to help standardize the way they share data in implementing PRIIPs requirements.
This comes at a time when the PRIIPs Regulatory Technical Standards as proposed by the European Commission were rejected by the European Parliament on 14th September and followed by a rejection in the Council. In both polls an overwhelming majority of votes supported the rejection. This stemmed, in large part, from the fact that the Parliament wanted rules mandated within the RTS to explicitly have fundamental clarification and guidance.
Although we may soon get more information about a potential delay and when the market can expect to have a revised draft of the RTS, asset managers and insurers cannot afford to take their eye off the ball. In a recent polling of several hundred asset managers and insurers, 75% confirmed this stating that any potential delays will not influence their plans for implementation.
Which is just as well that an official version 1.0 of the EPT and CEPT (comfort European PRIIPs template) has already been finalized by the European Working group, based on the requirements of the rejected RTS. Without it, the funds industry would be floundering in providing data to insurers.
Time to Collaborate
The template is the result of a collaboration between several leading European fund trade bodies that include for example the Germany’s BVI, the UK’s Investment Association and Club Ampere (sponsored by French trade association AFG) as well as insurance associations, such as UK’s ABI, Luxembourg’s ACA and Germany’s GDV. Despite the rejection of the level 2 RTS, the template will remain unaffected as of now. Florian van Megen, a retail market specialist at the Investment Association, recently said that “The template is safer than anything else we have out there at the moment.”
Specifically, the EPT (based on its most recent version) comprises 60 separate fields, to be populated with data that is required under article 14 of RTS (i.e. risk, performance, costs and narratives).
PRIIPs data will not only ensure that insurance companies are compliant with the EU regulation, UCITS products will also be allowed to continue to be sold in a standardised presentation, and unhindered via this channel once the regulation is in force.
The European Working Group that worked out the EPT is being supported by the European Fund and Asset Management Association (EFAMA) and Insurance Europe. And this is to be welcomed. They have the gravitas, the presence, to be able to carry this forward and bring all industry key actors on board to create a common standard. As both associations will have to hold back official recommendation of the template due to the rejected RTS, multiple national associations from fund and insurance industry have already started to promote the standard and to inform their members. It is a huge signal to the market when like in the UK the IA and ABI are even hosting a joint workshop on the EPT, inviting all its members.
Lunch in Luxembourg
This is encouraging given our involvement behind the scenes to help bring the template to fruition. We did something similar six years ago with fund platforms. Noticing common data/reporting/document challenges across these competitors, using our neutral position to gather them in one room to explore the commonalities, establish best-practices in the nascent fund platform industry, and seek to give a voice to these actors. It turned out to be a major success, and today we have handed over the reins and the Fund Platform Group is still going strong.
Last year, we saw a similar situation where three industries: asset management, insurance and banking, who had never had close relationships to one another, would soon face a common challenge in providing data for PRIIPs. So we convened the first cross-industry workgroup for the PRIIPs KID back in October 2015, followed by 2 additional series in January and May 2016, held in Luxembourg, London, Paris and Frankfurt.
Just a few months later, the result was a template that fulfills the data needs that would satisfy PRIIPs regulatory reporting across the asset management industry, banking, and insurance sectors.
Early on, we understood that having a set of standards for the information required in the KID would be crucial. So in light of the work we did with the working group, we supported the approach to involve EFAMA and encouraged them to become the public face for supporting the European PRIIPs template.
Igniting the Flame
With EFAMA’s imprimatur, this working group has after 4 months of intense work, with participants from over 15 member states and both industries, agreed on the first version of the European PRIIPs template. That is no small achievement, and we’re glad to have been able to contribute to it since its birth.
The work that all parties have done so far is evidence of the strength of community one needs in overcoming the challenge of new regulation. The genesis of the working group was to try and bring simplicity to a complex issue and to become an open-source standard. Hopefully the EPT and its accompanied standard the cEPT will prove to be an effective solution. Certainly, laying the groundwork was something we felt duty-bound to pursue.
The EPT is for sure evolving as PRIIPs regulation beds in. Regardless, it is a strong framework, and one that can reassure asset managers and insurers that they can begin implementing PRIIPs safely, right away.