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 20% smaller pension pot after 25 years Estimated cost of capital: 0.5% 1.5% Scenario 1: Careful calibration based on real risk Capital = 5% of liabilities Scenario 2: Overly conservative calibration Capital =15% of liabilities

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

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