Implementation PRIIPs: far reaching powers for the Authority for the Financial Markets (AFM) with regards to (re)insurance companies
On 16 August 2016, the Dutch Ministry of Finance has started a public consultation (link, in Dutch) regarding a legislative proposal that aims to extend the supervisory powers of the AFM with respect to (re)insurance companies (Implementation act regulation on key information documents – Wet implementatie verordening essentiële informatiedocumenten). The legislative proposal consists of the implementation of a specific clause in the European regulation on key information documents for Packaged Retail and Insurance-based Investment Products (no. 1286/2014, PRIIPs-regulation), which is directly applicable in the Netherlands in all other respects. The PRIIPs-regulation contains requirements on the provision of information regarding (the sale of) certain investment products for retail clients.
In short, the new supervisory powers of the AFM entail that the AFM may prohibit or restrict the marketing, distribution or sale of insurance-based investment products, as defined in the PRIIPs-regulation. Hybrid life insurance contracts, which contain both unit-linked and with-profit elements are examples of insurance-based investment products under the PRIIPs-regulation. The AFM has the authority to prohibit or restrict other types of financial activities or practices of (re)insurance companies as well.
Any prohibition or restriction imposed by the AFM is temporary and may only be imposed in exceptional scenarios. These exceptional scenarios include, in short, (i) the insurance-based investment product, activity or practice poses a threat to the financial markets, (ii) the existing regulatory requirements applicable to the insurance-based investment product, activity or practice are not sufficient and/or? (iii) the relevant issue of the product and/or activity would not be better addressed by improved supervision or enforcement. New innovative products that do not fall under the scope of existing regulatory requirements and which pose a threat to investor protection or to the orderly functioning of financial markets can be an example of a situation in which the AFM may use its new powers.
The PRIIPs-regulation enters into force on 31 December 2016. As of that moment, the AFM is entitled to use the abovementioned supervisory powers. The consultation will close at 13 September 2016.