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PROD 1.4 Application of PROD 4

PROD 1.4.1 R

1 PROD 4 applies to:

  1. (1)

    an insurance intermediary; and

  2. (2)

    an insurer,

with respect to:

  1. (3)

    manufacturing insurance products; 8

  2. (3A)

    product governance and distribution arrangements for legacy non-investment insurance products (see PROD 4.6); and8

  3. (4)

    distributing insurance products.

[Note: articles 1(2) and 25 of the IDD]

PROD 1.4.-1A R

6A TP firm and a Gibraltar-based firm8 must also comply with the provisions in:

  1. (1)

    PROD 1.4 and PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data);8

  2. (2)

    7PROD 1.4 and PROD 4 in relation to a pathway investment;8

  3. (3)

    PROD 1.4, PROD 4 and (where applicable) PROD TP 1 in relation to non-investment insurance products (including legacy non-investment insurance products) that are, or will be, marketed or distributed, or there are policies under the product that remain in force, in the United Kingdom.8

PROD 1.4.1A R

5 PROD 4.5 (Additional expectations for manufacturers and distributors in relation to value measures data) applies regardless of when the product was first manufactured.

PROD 1.4.2 G

1In PROD an insurance product may be read as being a reference to the product for distribution to customers generally and is not intended to refer to each individual contract of insurance being sold or underwritten (unless the context indicates otherwise).

PROD 1.4.3 R

1 PROD 4 does not apply in relation to an insurance product that is:8

  1. (1)

    a contract of large risks, or

  2. (2)

    a reinsurance contract.

[Note: article 25(4) of the IDD]

Manufacturing and distributing pathway investments

PROD 1.4.3A G

3 4A firm that is within the scope of PROD 4 (Product governance: IDD) when manufactures pathway investments other than in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme, is also subject to PROD 6 (Product governance: additional provisions for pathway investments) as guidance with respect to that manufacturing activity (see PROD 1.6.1R(2)).

PROD 1.4.3B R

3 4Where a firm:

  1. (1)

    manufactures or distributes pathway investments in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme; and

  2. (2)

    is not otherwise within the scope of the rules or onshored regulations7 in PROD in relation to that manufacturing or distribution activity, then PROD 4, PROD 1.4.4UK and PROD 1.4.10G, apply7 with respect to that manufacturing or distribution activity.

PROD 1.4.3C G

3 4The effect of PROD 1.4.3BR is to apply PROD 4 to any firm, such as a SIPP operator, which:

  1. (1)

    manufactures or distributes pathway investments in connection with its operating of a retail client’s personal pension scheme or stakeholder pension scheme; and

  2. (2)

    before the entry into force of PROD 1.4.3BR, was not subject to the rules or onshored regulations in PROD.

When an intermediary may be considered to be manufacturing

PROD 1.4.4 UK

2For the purposes of [PROD 4.2.1R, PROD 4.2.2R, PROD 4.2.29R, PROD 4.2.34R, PROD 4.3.1R and PROD 4.3.2R], insurance intermediaries shall be considered manufacturers where an overall analysis of their activity shows that they have a decision-making role in designing and developing an insurance product for the market.

3(2) A decision-making role shall be assumed, in particular, where insurance intermediaries autonomously determine the essential features and main elements of an insurance product, including its coverage, price, costs, risk, target market and compensation and guarantee rights, which are not substantially modified by the insurance undertaking providing coverage for the insurance product.

3(3) Personalisation of and adaptation of existing insurance products in the context of insurance distribution activities for individual customers, as well as the design of tailor-made contracts at the request of a single customer, shall not be considered manufacturing.

[Note: article 3 of the IDD POG Regulation]

PROD 1.4.5 G

1The effect of PROD 1.4.4UK2 and PROD 1.4.6R is that an insurance intermediary needs to consider if it is manufacturing an insurance product or if it would be a manufacturer for a legacy non-investment insurance product for PROD 4.6,8 and, if so, should comply with PROD 4.2 (Manufacture of insurance products).

Scope of ‘manufacturing’

PROD 1.4.5A G
  1. (1)

    8PROD 4.2 applies to firms that manufacture insurance products. The terms ‘firm’ and ‘manufacturer’ are used in that section interchangeably to refer to such persons.

  2. (2)

    The Glossary term ‘manufacture’ includes ‘designing, developing, creating and/or underwriting’ which cover activities prior to the insurance product being approved for marketing and distribution, and on a continuing basis after such approval.

Effect of provisions marked “UK” for certain manufacturers and distributors of insurance products7

PROD 1.4.6 R
  1. (1)

    1Subject to (2) and PROD 1.4.3R, provisions in this section and in PROD 4 marked “UK”2 apply to firms :8

    1. (a)

      manufacturing or distributing insurance products, but to whom the IDD POG Regulation does not apply;8

    2. (b)

      in relation to product governance and distribution arrangements for legacy non-investment insurance products,8

    as if they were rules.

  2. (2)

    For the purposes of (1), a word or phrase used in the IDD POG Regulation and referred to in column (A) has the meaning indicated in Column (B) of the table below:

    (a)

    (b)

    2

    2

    “Article 8(2)”

    PROD 4.2.30UK2

    2

    “customer” and “potential customer”

    customer

    2

    “insurance-based investment products”

    insurance-based investment products

    “insurance distribution activities” and “distribution activities”

    insurance distribution activities

    “insurance distributor”

    distributor

    “insurance intermediary”

    insurance intermediary

    “insurance undertaking”

    insurer

    “manufacturer” and “manufacturers within the meaning of Article 2 of this Delegated Regulation”

    manufacturer

    “manufacturing”

    manufacturing

    “shall”

    must

  3. (3)

    In this sourcebook, where a reproduced provision of an article of the IDD POG Regulation refers to another part of the IDD POG Regulation, that other provision must also be read with reference to the table in (2).

  4. (4)

    In relation to a legacy non-investment insurance product, the reproduced provisions of an article of the IDD POG Regulation must be read to be consistent with the application of product governance and distribution requirements in PROD 4.2 and PROD 4.3 to a legacy non-investment insurance product.8

Effect and interpretation of PROD 1.4 and PROD 4 for certain manufacturers and distributors of pathway investments

PROD 1.4.6A R

3 4A firm to which PROD 1.4.3BR applies must

  1. (1)

    comply with provisions marked "UK"7 in PROD 1.4 and PROD 4 as if they were rules; and

  2. (2)

    read terms or phrases found in PROD 1.4 or PROD 4 as follows:

    1. (a)

      terms referred to in column (1) of the table below have the meaning indicated in the same row of column (2) of the table;

    2. (b)

      terms relating to insurance or insurance products have the meaning of the corresponding term relevant in the context of pathway investments; and

    3. (c)

      terms or phrases which are only relevant to firms manufacturing or distributing insurance products may be disregarded.

This table belongs to PROD 1.4.6AR(2)(a).

(1)

(2)

7 7
7 7

7ICOBS 2.5-1R and COBS 2.1.1R

7 COBS 2.1.1R

“ICOBS”

relevant conduct of business obligations

"PROD 4.2 requirements of the IDD POG Regulation)”7

PROD 4.2

7

“insurance-based investment products”

pathway investment

“insurance distributor”

distributor

“insurance distribution activities”

distribution activities

“insurance intermediary and an insurance undertaking”

firms

“insurance product”

pathway investment

“‘manufacturer’ and ‘manufacturers’ within the meaning of Article 2 of this Delegated Regulation”

manufacturer

“manufacturing”

manufacturing

“premiums”

costs and charges

“shall”

must

Where?

PROD 1.4.7 R

1 PROD 4 applies to a firm with respect to activities carried on from an establishment maintained by it, or its appointed representative:8

  1. (1)

    (for all insurance products and pathway investments) in the United Kingdom; and8

  2. (2)

    (in addition, for non-investment insurance products) overseas, in relation to an insurance product that is, or will be, marketed or distributed, or there are policies under the product that remain in force, in the United Kingdom8.

[Note: in respect of (1),8 article 7(2) of the IDD]

PROD 1.4.8 R

[deleted]2

PROD 1.4.9 G

[deleted]2

1

Interaction of PROD 4 and the RPPD Guide

PROD 1.4.10 G

1A firm to which PROD 4 applies need not apply the guidance in RPPD for matters covered by PROD if the firm has complied with PROD 4 (see also PROD 4.4.2G). PROD 4.4 includes guidance based on the RPPD which firms subject to PROD 4 should apply.