Insurance Europe assessment of the proposed PEPP Regulation

Insurance Europe assessment of the proposed PEPP Regulation Michaela Koller, director general Brussels, 31 January 2018 European Parliament Public Hearing

Two key priorities for the PEPP Guarantee as default: Protection of the financial outcome Behavioral economics PEPP Cost-efficiency: Collective investment Long-term horizon Capital requirements Number compartments Avoid complexity: One default option Tailored information disclosures

How to match safety and attractiveness? How traditional insurance works: Smoothing and pooling mechanism, ie. getting the average long-term return

Excessive capital requirements are detrimental Excessive capital requirements create real damage Estimated cost of capital: 0. 5% 20% smaller pension pot after 25 years Estimated cost of capital: 1. 5% Scenario 1: Careful calibration based on real risk Scenario 2: Overly conservative calibration Capital = 5% of liabilities Capital =15% of liabilities

How to avoid unecessary complexity? Business case: online PEPP sold by an insurance intermediary Disclosure overload? PEPP Regulation Proposal (84) Originating from PRIIPs (36) PEPP KID (51) PEPP-specific (15) Product disclosures Originating from IDD (28) Originating from IDD DAs (5) Sales disclosures GDPR (13) Digital friendly? Distance marketing directive for financial services (27) E-commerce directive (6/20) Layered approach? ? ? ? Solvency II (14/30) ? ? ? Total: 130 -174 Product disclosures

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