PRIIPs, KIDs and EU requirements for Packaged Retail Investment Products

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The Packaged Retail and Insurance-based Investment Products Regulation (Regulation (EU) No 1286/2014), hereinafter referred to as the ‘PRIIPS Regulation’, has been published in the Official Journal of the European Union on the 9th December, 2014, and shall apply as from 31st December, 2016.


The term ‘PRIIPS’ essentially includes any investment product that is in a packaged form, i.e. any product which is either wrapped or bundled or which has other mechanisms that alter an investment in the product compared to a direct holding in the underlying assets. It also includes such products issued by SPVs. If such definition is read literally, it would mean that few products will qualify, as few will meet both definitions. Nevertheless, Michael Barnier, Commissioner for the Internal Market and Services, noted that the Key Information Document (‘KID’) Regulation “aims to ensure that no investment product slips through the net”.

The term ‘insurance-based investment product’ means “an insurance product which offers a maturity or surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations”

According to the Regulation, the following products will not be PRIIPs:

  • Products where the precise rate of return is set in advance for the entire life of the product;
  • Life insurance contracts where the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or infirmity;
  • Non-structured deposits that contain no element of packaging
  • Plain shares and bonds (where there is a direct holding of the relevant assets);
  • Insurance products that only offer insurance benefits, such as pure protection or non-life insurance (where the surrender value is not dependent on fluctuations in the performance of one or more underlying assets or reference values);
  • Various pension schemes, such as occupational pension schemes and certain other employment based pension schemes which are mandatorily required by national law (e.g. auto enrolled schemes).

The ‘KID’

The regulation applies to PRIIP manufacturers and persons advising on, or selling, PRIIPs. Prior to a PRIIP becoming available to retail investors, the regulation requires the manufacturers or remanufacturer of PRIIPS to prepare a Key Information Document (‘KID’) which should be made available to retail investors and on the website of the manufacturer or remanufacturer of the product to which it relates. It lays down uniform rules on the format and content of the key information document to be drawn up by PRIIP manufacturers and on the provision of the key information document to retail investors in order to enable retail investors to understand and compare the key features and risks of the PRIIP. These PRIIPS manufacturers will need to produce a standardised, concise, three-page key information document in respect of a broad range of products including insurance-based investment products as unit-linked life insurance policies.

Responsibility for producing and distributing a KID

The obligation to produce the KID falls on the “manufacturer” of the PRIIP. This includes the PRIIP provider and any entity which makes changes to the PRIIP, including changes to the costs or creating a new PRIIP out of combinations of PRIIPs. This caters for situations in which the PRIIP provider does not have final control of all details of the issued product, for example when the product is issued and priced by an adviser or a platform service provider.

The KID must be provided to retail investors by the adviser or manufacturer “in good time” before there is a binding agreement on the product. In the case of distance sales, where the investor has contacted the distributor on his own initiative, subject to the distributor providing specific information regarding the KID, the KID may be provided “without undue delay” after concluding the product sale.

KIDs can be provided to investors on paper or, where the context of the transaction supports it, some other durable medium or via a website. However, when selling PRIIPs face-to-face, paper should be the default option.

Form and content of the KID

Naturally, in order to promote consistency and clarity of language, the Regulation sets out mandatory rules for the form and content of the KID. Furthermore, it permits national regulators to demand to see the KID prior to the marketing of the PRIIP. Thus, it is of vital importance that the following conditions are met when drawing up the ‘KID’:

  • KIDs must set out information in a manner that is “accurate, fair, clear and not misleading”;
  • the KID must be a stand-alone document, separate from marketing materials, unless the range of investment options means that all information cannot be provided in a single concise document, in which case it must clearly signpost where the additional information can be found;
  • the KID must be no more than three sides of A4 paper, and this requirement cannot be circumvented by using small-print as the text must be easy to read;
  • brevity is important so the information must be restricted to what investors need and must be written in plain language;
  • As a minimum, the KID must be written in at least one of the official languages  used in the part of the Member State where the PRIIP is distributed, or in another language accepted by the competent authorities of that Member State;
  • the KID must promote comparability of different PRIIPs.


Each KID must contain the following:

  •  An explanation of the purpose of the KID;
  • The identity of the manufacturer and its regulator;
  • A comprehension alert for complex products, including derivatives and structured products under the current MiFID regime;
  • Information describing the PRIIP headed ‘What is this product?’ including type, objectives, target consumer, details of any insurance benefits and term;
  • Other headings which include the following, amongst others: ‘What are the risks and what could I get in return?’, ‘What happens if the PRIIP manufacturer is unable to pay out?’, ‘What are the costs?’, ‘How long should I hold it and can I take money out early?’, ‘Other relevant information’;
  • Complaint redress information.


In addition to these requirements, Article 9 clearly states that marketing communications that contain specific information relating to the PRIIP shall not include any statement that contradicts the information contained in the key information document or diminishes the significance of the key information document. Marketing communications shall indicate that a key information document is available and supply information on how and from where to obtain it, including the PRIIP manufacturer’s website.

More guidance on the presentation and contents of the KID will be provided in technical standards published by the European supervisory authorities (ESAs) the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA). In fact, the FCA has said it will create a template KID for guidance and that this should assist firms in complying with some of the rules.