|
|
ESAs have developed two main types of alternative presentation of performance information:
Option 1 for each of the three products (Fund, Structured product, Insurance-based investment product) is the current KID.
In addition to these two main types of alternative presentation of performance information, ESAs also propose an additional approach showing “illustrative” (so-called “what-if”) scenarios for Structured products (options 3 and 4), testing the inclusion of illustrative scenarios together with probabilistic scenarios, as well as illustrative scenarios only. These are, in some regard, similar to the approach that is currently used for so-called structured UCITS. Originally, ESAs had considered options with illustrative scenarios for Funds and for Insurance-based investment products, but propose to limit the testing of illustrative scenarios to Structured products only.
Finally, ESAs consider it relevant to test Option 5 for Insurance-based investment products with probabilistic performance scenarios, though they understand the concern expressed by the Commission as to the length of this option. The aim of the presentation is to provide further relevant information to illustrate the factors affecting performance and the features of the product (e.g. death event or annuity pay-out). Such products can be complex by their nature. However, to address the Commission’s concerns, they have sought to streamline the length of this Option as far as possible. In addition, a new Option 6 has been developed to test an annualised average of past performance for various time horizons, as this can be relevant for longer term Insurance-based investment products.
ESAs appreciate that the Commission has raised concerns regarding whether the testing of illustrative scenarios for Structured products would be compliant with the Level 1 Regulation, in particular whether it would qualify as a performance scenario. In addition, the Commission has raised concerns that using “what-if” scenarios for testing would lead to a different treatment and presentation which goes against the objective of ensuring the comparability of products in the PRIIPs KID.
Whilst ESAs fully support the objective of ensuring comparability amongst different products, they consider it equally important for consumers to receive information that is meaningful enough to enable them to make an informed decision before purchasing a PRIIP. This is one of the aspects of the current KID which has been criticized by external stakeholders.
In addition, ESAs consider the Level 1 text to be drafted in a sufficiently open manner and the PRIIPs Level 2 text already provides for some product-specific approaches, for example in relation to the pay-off graphs used for Exchange-Traded Derivatives. The reason for including such graphs is rather similar from a conceptual perspective as for the use of ‘illustrative’ scenarios for Structured products.