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PRIIPs – Lessons from the Life Industry
27th February 2019
• Software company founded by Actuaries and IT specialists• 100% owned by Constellation Software Inc (CSU)• Specialise in Fund Admin and Investment Accounting• Solutions for outsourced and insourced• 60+ client organisations• Offices in Dublin, Hong Kong and Kuala Lumpur
Financial Risk Solutions
FRS – Solutions for:
• Unit Pricing and Valuations• Fees and charges
• Cash Allocation & Rebalancing• Fund of Funds & Feeder Funds• Box Management
• Solvency 2 – QRT Reporting
• PRIIPs – KID generation
• Transaction Costs Reporting
• Tax (UK & Irish)
• …
KID Production – not so easy…
KID Production – not so easy…
KID Production – not so easy…
Removal of high cost fund outliers from MOP listings
Some assets managers have struggled to supply data
For MOPs the Generic KIDs show range of costs
Greater focus by sales intermediaries on costs
Shrinkage in fund range
PRIIPs –Reaction of Life Industry – Insurers and Intermediaries
8Impacted on insurer/asset manager relationships
9
Review issues
Current Approach
Solution partners
PRIIPs issues
Lessons from insurance experience
Technology solution
Differences between
insurance and funds industries
A bit like Brexit – how do you prepare without knowing final environment!
9
Civil liability case -proofing
KIDs very different from KIIDs
10
Differences (and cross-links) between insurance and funds industries
10
Insurance Funds
Retail Institutional /Retail
MOPs Individual / Umbrella
Multi-level funds Single level
External Collectives In-house
Calculation issue for Transaction Costs
11
Keep up to date with developments
Implementation experience from insurance industry
Start work on the data issues
Can’t defer planning until final requirements known
Regulatory framework is in place
PRIIPs –Planning
11
1212
Implementation Lessons
13
Implementation was a bigger challenge than anticipated
Timescales proved to be tight – uncertainty until end
Benefit of simplifying the problem by reducing its scale
Benefits of using external technology partners
It’s more strategic than was thought!
PRIIPs –Key Lessons
For life insurers, PRIIPs was a big challenge
Issues• Tight timescales• Data collation• External dependencies – EPT et al • Legislation guidance was quite late • Problems in RTS interpretations and
ESA Q&A
13
Helps deal with short timescales
6 months timetable envisaged by Nov 2018 consultation paper
A technology vendor can do a lot of the heavy lifting
Company can focus on strategic issues
Year by year projections are needed
It’s only the start of the PRIIPs journey
Technology is key to delivery
PRIIPs –Key Lessons
PRIIPs is here to stay
e.g. for diverse cost structures
14
15
A technology vendor can do a lot of the heavy lifting
Company can focus on strategic issues
Year by year projections are needed
It’s only the start of the PRIIPs journey
Technology is key to delivery
PRIIPs –Key Lessons
15
It’s all about the data!
16
Efficiencies & Pitfalls
17
In-house
KIID solution expansion
Technology Partner
PRIIPs Solution
Outsourced
Technlogy Solutions
17
KIDs and KIIDs - chalk and cheese
Document generation and distribution
Calculations
CRM Database / Archival and Enquiry
Risk Management
Don’t re-invent the wheel!
Can do a lot of the heavy lifting
Very beneficial when dealing with short timescales
Can be expensive
18
Calculations – What do we need to know?
1
2
Derived from schedule of historic unit prices
Depends on charges (up-front and on-going) and schedule of historic unit prices
Risk Indicator
Performance Scenarios
3Costs Derived as difference in gross and net rates of
return
Results continually changing over time due to volatility in source data
Multiple projections required (1-7 or 1&7) for each scenario and each projection period
18
Why not leave all of this to the technology provider!
19
PRIIPs Operating Model
Copyright ©FRS 2019
19
Classic three stage operating model – inputs, calculations and outputs
20
PRIIPs : Simplify the implementation problem!
• Language• CurrencyRestated FoF unit
prices
Companies should deploy PRIIPs resource to strategic issues to maximise benefits
Internal data sources
External data sources
Company website
Strategic issues
A technology partner can solve this part of the implementation
Practical issues Practical issuesUAT & test-cases
20
21
Calcu
latio
n C
heck
list Is it a systematic solution?
Is it consistent with other companies?
Has it market credibility?
Results cross-checked against previous?
What are the analytics capabilities?
Has it been externally validated?
Pitfall– Just don’t use Excel!
Possibly –we have a master template!
Do we need to do that?
We don’t know
Possibly –but not automatic
Resist the temptation to use Excel – it’s only going to create problems down the road! 21
22
Risk Management: CRO - can you stand over the use of spreadsheets?
Excel solution KIDs
Document production service
Archive
KIDs are significant pre-sale documents
Defending likely civil litigation• What’s your documentation?• What’s the traceability? • What’s the proof?• Is it water-tight?
We used a spreadsheet! – we might have a copy How not to start the conversation with defence counsel!
You may be in court defending the validity of KIDs22
23
PRIIPs: KID production is only the start of the journey
KIDs delivered
PRIIPs is done and dusted – what’s next?
Consistent with RTS and not misleading?
KIDs create own civil liability risk exposure
Legal robustness• Archived?• Results locked-down?• Audit trail?• Centralised storage of results and
data inputs and intermediate calculations results set?
Would the CRO be confident that you will have a provable dataset to support a robust defence of the accuracy of KIDs for potential future civil liability cases?
23
24
PRIIPs technology solution
Calcu
latio
n C
heck
list Systematic solution
Customer test cases
Market credibility
Central results warehouse
Advanced analytics and reporting
Unit tests/test cases
24
You will know the results are right – you can also make use of them to better effect
25
Automation of data transfer
Proven market solution
Modern technology
PRIIPs technology
solution
Centralisation of data storage
Locked down audit trail of
source data and output results with drill-down
details
Complete data integration
Platform for advanced analytics and reporting
PRIIPs technology solutions
25
Civil liability case -proofing
Visualisation tools
2626
Q&A
27
Recommendations
Select technology partners
Be strategic
Review insurance experience
Engage early
Don’t be complacent - plan ahead
PRIIPs for UCITS is deferred until 1/1/2022
Thank You.
Contact: Frederic Simon, frederic.simon@frsltd.com
Frank Carr, frank.carr@frsltd.com
27th February 2019
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