Article 4 of the Regulation splits PRIIPs into two kinds. One is an investment, whatever its legal form, where the amount repayable to the retail investor changes with reference values or with the performance of assets the investor does not buy directly. The other is an insurance product whose maturity or surrender value is wholly or partly exposed to market fluctuations1. The recitals give investment funds, life insurance policies with an investment element, structured products, and structured deposits as examples2.
For example, a structured note whose redemption amount depends on the level of a stock index is a PRIIP. Shares or sovereign bonds that an investor holds directly are not PRIIPs3. The manufacturer of a PRIIP draws up a key information document before the product is made available to retail investors. The article that covers this term explains the content of the Regulation.