Product offering – prevention and adaptation

Addressing the needs arising from the growing renewable energy market, PZU has included insurance for corporate clients who invested in RES in its offering. The PZU Wind Power and PZU Solar Power policies are products that protect wind and solar power plants in the event of a failure, damage or destruction. These policies also give clients protection against civil liability and loss of profit caused by material damages. Both policies offer protection for the equipment used to generate energy (the PZU Wind Power: gondolas, towers, foundations, internal cabling and the PZU Solar Power offer: photovoltaic panels, their construction, internal cabling, inverters) and all of the accompanying infrastructure: energy storage units, underground cable connections, overhead power cables, fiber optic cables, equipment to export the capacity to the power grid and the auxiliary infrastructure: fencing, lighting, oversight systems, internal roads, buildings housing the station and the switch board and equipment.

TUW PZUW operates in the insurance segment for corporate clients, medical operators and public institutions and takes climate issues into account in its offering in a comprehensive manner also by offering insurance cover for renewable energy sources. The specific nature of business insurance provided by a mutual insurance company involves the execution of insurance contracts by way of negotiation based on an individual risk assessment, with insurance programs attuned to the individual needs and expectations of its members. According to the ESG “Sustainable Development” strategy TUW PZUW is also a partner in the green transition of the Polish economy. It is pursuing its obligations by insuring entities in the broadly understood coal energy sector which are in the process of changing their so-called energy mix, in particular taking into account those areas of activities of energy companies that develop renewable energy sources, i.e., wind parks, solar farms, water plant networks and biogas plants. TUW PZUW has in its offer the insurance products for wind farms, “Power of the Wind,” and for photovoltaic installations, “Power of the Sun.” This is comprehensive property insurance against all risks, including against damage and loss of profit, as well as liability insurance associated with the operation of wind turbines and photovoltaic panels.

In 2023, TUW PZUW expanded its offer to include liability insurance for environmental damage. It is intended for entities using the environment within the meaning of the Act of 30 April 2007 on the Environmental Damage Prevention and Remedy. These include entities engaged in activities that cause environmental damage or risk of such damage. The scope of insurance covers the insured’s liability for environmental damage, including the costs of actions taken to repair or replace in an equivalent manner natural elements or their functions, as well as the costs of actions taken to prevent or reduce environmental damage.

This service allows a more cost efficient energy management in buildings and reduction in carbon dioxide emissions. The Smart Energy Management System makes it possible to integrate all material energy sources with a view to limiting unnecessary or excessive consumption. Combining modern information technology, monitoring of living conditions in buildings, algorithmic control of significant energy-consuming equipment while in use and when idle may bring savings of up to 15 to 30%. Benefits of implementing the Smart Energy Management System – lower consumption of all sorts of energy – and tangibly lower CO₂ emissions are in line with the companies’ need to adjust to the challenges related to the situation on the energy market and potential limited access thereto. Two smart energy management system implementations are currently underway.

The PZU Group sees to it that the environmental impact of its product is limited not only in the process of creating and offering it, but throughout whole life cycle. On the one hand, this is additional support for PZU Group clients, contributing to reducing their environmental impact. On the other hand, this is the way in which the PZU Group address its adverse environmental impact in the value chain. Within the PZU iAgro initiative, it implements a service allowing clients to reduce the costs of agricultural production and optimize environmental impact. The aim of the project is to:

• optimize and make accurate the level of consumption of plant protection products per hectare of crops;
• reduce the number and cost of protective procedures;
• allow the use of natural or mechanical plant-care procedures instead of spraying;
• provide access to several dozen plant disease models;
• implement prevention policies for PZU clients (the client can access the crop damage risk estimation system, alerts and warnings);
• provide clients with support in reducing CO2 emissions.

SPZU iAgro system involves specialist measurement stations (of more than a dozen parameters), software with advanced AI algorithms and disease models, online data review and management platforms (incl. disease alerts). The assumptions of PZU iAgro and its pilot also involved building a program and method of measuring CO2 balance in agricultural production. In the wider rollout of the PZU iAgro service, the so-called CO2 calculator will form part of the solution offered to PZU clients. The system of monitoring and signaling pests and infections allows pinpointing when and to what extent protective procedures should be applied. A procedure carried out too late, or a wrongly identified pathogen, may decrease the quality of the crops. This contributes to financial losses. Development of the system was underway in 2023, and 80 farms took part in testing the new solutions. Evaluation surveys show that the solution has helped clients reduce between 10% and 40% of their agronomic treatments this season.

PZU offers MOD insurance coverage for electric cars included in vehicle fleets. It covers damages to chargers, including a wallbox and charging wires and the battery in cars. This responds to the growing popularity of electrical cars in vehicle fleets. According to PSPA data, 19,612 new all-electric passenger and commercial vehicles (BEVs) will be registered in Poland in 2023, more than half as many as in 2022. The number of electric trucks, buses, mopeds and motorcycles is also growing. In parallel with the fleet of electric vehicles, the charging infrastructure is also developing. At the end of October 2023, there were 3,166 publicly available electric vehicle charging stations (6,378 points). Under the European Commission’s “Fit for 55” legislative package, stricter CO2 emission standards for passenger cars and vans will accelerate the transition to zero-emission mobility by requiring a 55% reduction in average emissions from new cars from 2030 and 100% from 2035 compared to 2021 levels. With electric car insurance, fleet clients who take out MOD insurance in PZU can count on protection in the event of damages to those parts of an electrical vehicle that result, among other things, from theft, overburdening the installation, overheating, circuit break, drop in voltage and damage due to gross negligence.

The growing interest in electric cars on the part of vehicle fleets, arising from changes in European Union legislation and the Polish act on electric mobility and alternative fuels, have led to PZU growing its efforts in this regard. Along with the technological operator of PZU iFlota, PZU has implemented a prevention program based on a fleet management information system for corporate fleet clients. The program allows an additional advisory module for those PZU clients who are transitioning from a gas to electric fleet. The aim of PZU iFlota EV is to support clients in making their fleet more secure, and at the same time facilitating the process of fleet electrification which will be key in the coming years in reducing CO₂ emissions in the fleet market. PZU also made available reports, a configurator, and a calculator to evidence the cost efficiency of electric mobility. The tool is publicly available on PZU iFlota’s website https:// www.pzu.pl/pzuiflota.

In property insurance, PZU offers a product which covers equipment generating energy from renewable sources. The insurance also covers owners of photovoltaic installations against the risk of disruptions in or lower efficiency of electricity generation. PZU Eco Energy is a solution, among others, for households, small and medium-sized enterprises and agricultural farms that use photovoltaic cells, solar thermal collectors or heat pumps to produce energy for their own needs. The insurance is available in three variants, and the client may select the one best tailored to their needs. The PZU Eko Energia policy protects photovoltaic installations (including a car charger and battery) against all risks, meaning loss, damage or total destruction as a result, e.g. of a failure, fire, power surge, flood, wind gust, hail or other sudden weather phenomena as well as vandalism and theft.

The PZU Group sees to it that the environmental impact of its product is limited not only in the process of creating and offering it, but throughout whole life cycle. This in particular concerns the claims handling process. Within TPL and MOD insurance, an innovative process called Green Parts is in place, which regulates the question of disposing waste produced in repairing the damaged vehicle. Annually, PZU covers the cost of producing around 4 million spare parts. It assumes responsibility for managing the remains of damaged vehicles (parts replaced with new ones) in accordance with the requirements of generally applicable laws. Improper disposal of damaged vehicle parts creates an environmental hazard. That is why Green Parts partners who receive remains of vehicles after repair are companies experienced in disposing motor vehicles and spare parts. They hold all the required permits. Their professionalism and reputation guarantee that each part provided to them is handled in line with legal regulations and best environmental standards. The technical condition of damaged vehicle parts may pose a threat to human health and lives. In collaboration with a network of qualified partners, we make efforts to ensure that all parts (qualified for replacement due to damage) are replaced rather than refurbished. Our actions in this area are also aimed at reducing the volume of trade on the secondary market for salvage that has lost its safety features. An important element limiting the environmental impact within the claims handling process is also the ability to rent a replacement electric car which positively contributes to lowering greenhouse gas emissions.

In 2023, Alior Bank was financing auction projects in renewable energy sources (RES). The offering is addressed to entrepreneurs who won an auction for energy sales held by the Energy Regulatory Office. Within this model, the bank proposes financing for the construction of new wind or photovoltaic plants over 500 kW. Special-purpose small, medium and large vehicles managed by investors who are experienced in implementing RES projects may avail themselves of this offering. The advantage is the opportunity to finance as much as 80% of capital expenditures and adjust the installments to seasonal increases and decreases in energy sales, along with the long repayment period correlated to the duration of auction assistance.

In 2023, Alior Bank expanded its offering with an Investment Loan for Renewable Energy Grant to finance the purchase, installation, construction or modernization of renewable energy installations. The RES grant is provided by Bank Gospodarstwa Krajowego and allows for repayment of the loan principal of 50% of the net cost of the implemented investment. The investment loan for the RES grant is granted for up to 20 years. Its maximum amount is PLN 5 million. Owners and managers of multifamily buildings, such as housing communities and cooperatives, as well as building societies, can apply for it. A prerequisite for the loan is a previous positive decision by Bank Gospodarstwa Krajowego on the RES grant.

This group of clients was also offered by Alior Bank:

• Preferential financing for energy modernization of multifamily residential buildings in the form of a thermal modernization loan. This loan is co-financed using funds from Regional Operational Programs for the following regions: Lower Silesia, Łódź, Smaller Poland, Podlaskie, Pomerania and Kujawy-Pomerania.
• Financing of thermal modernization in the form of a loan with a premium from Bank Gospodarstwa Krajowego. The BGK bonus not subject to repayment to be used as a source of partial amortization of the financing for energy modernization or renovating buildings is just one of the new offer’s strong suits. Housing cooperatives and communities and local governments from across Poland could also count on a high amount of funding: up to PLN 5 million, a long term of funding: up to 20 years and reimbursement for the costs of the audit and technical documentation

In line with the 2021 strategic declaration, Bank Pekao continues its operations in sustainable finance, such as social and environmental projects and ESG bond issue support for its clients. Bank Pekao chiefly intends to see to a major reduction in financing high-emission projects in the credit portfolio. The most important projects financed by the Bank in the ESG area in 2023 included:

• sustainability-linked consortium financing for an energy company in the amount of PLN 600 million;
• consortium financing linked to the sustainable development goals of one of the largest groups in the media and telecommunications industry in the amount of PLN 1.2 billion;
• investment financing for the construction of a wind farm in the amount of PLN 95 million;
• financing under a consortium of financial institutions of a loan linked to sustainable development for a total of PLN 1.65 billion;
• financing of the construction of a 1.2GW wind farm within the framework of a consortium of financial institutions credit for a total of PLN 3.9 billion;
• joining an international consortium that will finance the construction of a tramway line in Krakow in the form of a public-private partnership. Bank’s participation in financing exceeds PLN 0.5 billion.

Furthermore, Bank Pekao

• served as a joint organizer and joint bookrunner for the issuance of 7-year sustainability-linked bonds in the amount of PLN 3.49 billion for Poland’s largest provider of integrated media and telecommunications services:
• served as the sole organizer of the issuance of green Eurobonds (Climate Awareness Bonds) for an international financial institution in the amount of PLN 400 million;
• was the joint organizer and dealer for the issuance of green bonds of a company belonging to an international real estate developer group at PLN 180 million;
• was a joint organizer and dealer for the issuance of 3.5-year green bonds of a company belonging to an international developer group at PLN 340 million;
• issued 500 million EUR worth of green Eurobonds as part of EMTN’s 5 billion EUR program for the issuance of medium-term Eurobonds.

PZU has committed to include, in the wider sense, the ESG factors in its assessment of key clients and investments. According to the internal definition, the assessment covers the largest corporate insurance clients that operate in sectors which are highly and moderately sensitive to ESG risks and have a significant impact on PZU revenues.

Internal analyzes were used to select industries highly and moderately sensitive to ESG risks. These were carried out on the basis of data on national greenhouse gas emissions and the percentage contribution of individual industries to CO2 emissions. Furthermore, external data sources were used, including good market practices, guidelines from international organizations(OECD, UNEP FI, ECB) and leading rating agencies, as well as regulatory requirements (EU Taxonomy).

Highly sensitive sectors include those industries that rely most heavily on non-renewable energy sources, are responsible for the greatest level of greenhouse gas emissions from direct and indirect emissions, and have the greatest impact on environmental degradation. The following industries are classified to this group: the fuel industry, the mining industry and the conventional power industry. Medium-sensitive industries include: chemicals, transport, automotive, construction and agriculture.

The assessment of clients was carried out on the basis of two original methodologies for public and nonpublic entities. These methodologies were developed within the PZU Group under the supervision of PZU. The ESG assessment methodology for key corporate clients was updated in 2023. The main changes relate to interpreting the strategy indicator to account for updates to client databases, enabling ESG assessments based on clients’ non-financial reports, and updating the mapping of sectors into high, medium and low ESG risk-sensitive categories based on the EU Taxonomy. In the environmental area of the methodology, topics such as greenhouse gas emissions, carbon footprint, business impact on biodiversity, energy intensity levels, waste management, current key company-defined environmental risks and their management, adoption of a climate neutrality goal and decarbonization strategy have been included.

Issues defined in the social area include: respecting labor rights, ensuring safe working conditions, fair competition and social activities. The area of corporate governance encompasses: issues related to the diversity of management bodies, the prevention of corruption and unfair competition, the structure of management and supervisory bodies, the protection of minority shareholders’ rights, the link between the remuneration of management boards and the achievement of sustainability objectives.

The final assessment also depends on the sector in which the company operates. The application of the ESG criteria serves the purpose of risk assessment and is not exclusionary for clients.

PZU insures about 2 million hectares of agricultural crops in Poland. As a leader in this market segment, PZU has tailored insurance offer for sectors most exposed to climate risk, such as agriculture. It covers the protection of crops, farm buildings, movable property (including agricultural equipment), livestock, poultry and apiaries as a result of fortuitous events including flood, hurricane, hail, driving rain or lightning.

In addition to developing its product offerings, PZU is looking for solutions to address the challenges posed by the increase in extreme weather events triggered by climate change and causing massive damage to agriculture. The Agro Lab tool helps in estimating losses caused by droughts, hurricanes or heavy rains. It is designed for PZU’s mobile experts and uses AI and space technology. The AI algorithms employed in the tool use satellite images of the area and particulars featured in the PZU database to specify the area damaged. They then support the appraisers in efficiently calculating the claims payable. The implementation of Agro Lab at the PZU Group reduced the time it took to analyze damage on site by around 50% and expedited the payment of amounts claimed by around 25%.

The environmental guarantee is a form of protection for companies whose activities may cause an adverse impact on the environment, e.g.: chemical plants, companies dealing in transborder movement of waste and municipal services plants. The guarantee is a commitment to pay a specified compensation if the company to which the guarantee has been granted fails to remove adverse environmental effects of its business operations. The beneficiary of this guarantee is the environmental protection authority issuing the relevant administrative instrument giving a permit to use natural resources.

As part of its cover against lost profits, PZU protects businesses whose profits decline, for instance as a result of damage to their assets insured by PZU, e.g. caused by fire, flood, cyclone or other random events.

PZU for the environment

In terms of environmental damage liability, PZU offers two solutions.

As part of business third party liability insurance, it is possible to extend (in the form of additional clauses) the scope of coverage to include civil liability for damage caused by the release of hazardous substances into the air, water or ground (or civil and administrative liability for environmental damage). These clauses are offered primarily to industrial companies, as well as the construction, energy, wastewater treatment and waste management industries.

PZU also offers environmental damage liability insurance. Its purpose is to provide the insured with comprehensive environmental damage liability insurance (in particular, to the extent regulated by the Act on the Environmental Damage Prevention and Remedy and other environmental laws) and civil liability for damages resulting from emissions.

Insurance cover is provided for the civil and administrative liability of the entity using the environment. Insurance cover includes, but is not limited to:

• liability for damage to land belonging to third parties and own land, protected species and protected natural habitats,
• the costs of remedial actions taken to repair or replace in an equivalent manner natural elements or their functions, and
• the costs of actions taken to prevent or reduce environmental damage,
• defense costs, needed by the insured to defend against claims against them, in terms of events covered by the introduced GTCI, which is in addition to the clauses included in third party liability insurance.

Insurance is offered in particular to business entities operating in the following industries: industrial production (among others: heavy industry, chemical, petrochemical, food industry), related to the supply of energy and gas, water and sewage).

In addition, in road carrier third party liability insurance in domestic and international traffic, cover has been extended to include liability for environmental damage implementing the ESG policy.

In non-life insurance: PZU Doradca, insurance against fire and other elements , and PZU for housing associations and co-operatives, a discount has been introduced for clients with flood and fire protection to minimize the effects of climate risks in accordance with guidelines derived from the Taxonomy. PZU Dom insurance, meanwhile, has introduced a discount for clients with flood protections.

The PZU Policy for Associations and Co-Operatives involves comprehensive insurance cover for housing associations and co-operatives as well as social construction associations. The cover may extend to the entire assets related to the operations in real property management. The product also involves cover against climate risk, including fire and other elements, floods, winds, thunder-strikes, rain, and inundation also due to melting snow.

Addressing the needs of the clients from the group defined, including housing associations and co-operatives, the insurance offer was enhanced thanks to the PZU Bezpieczne Lokum product. Owners of houses and residential units can now count on insurance cover for their movable and immovable property as regards such force majeure events as fire, hurricane, flood, inundation, explosion, power surge and devastation.

Within the claims handling process for crops, PZU has in place an innovative process for determining damage to winter grain using satellite teledetection. This solution determines the objective results and makes it possible to assess the damage to the crops in sites that are not easily accessible and at short order, which is very important when it comes to larger plots of land. The utilization of remote sensing methods is also applicable to damages under risks related to spring ground frosts and when determining the timing for harvesting crops for most field crops. In addition, work is underway to design a new remote sensor technology in damages caused by the risk of negative overwintering effects, cyclone and torrential rain. By the end of 2023, drones helped to establish the scope of damage in 103 agricultural claims and 700 property claims.

In cooperation with young researchers and engineers, PZU LAB has implemented a pioneer technological solution to monitor the effect of painting processes at the Gdańsk Renovation Shipyard on the surroundings and natural environment. The pollution detection system is a tool that has automated the manual process of verifying paint particle deposition. This contributes to eliminating potential environmental problems and improving the processes involving painting vessel hulls. This is the first solution of this kind to be implemented in Polish shipyards. The design implements computer video monitoring. The artificial intelligence algorithms used allow detecting colors and shapes of the depositions and spattering. The tool activates in intervals within a 24/7 cycle, sends information on the density of deposition and its accrual in given spots to the database, along with an e-mail to relevant people. Thanks to this, paint particles deposits may be detected much faster compared to manual verification by a shipyard worker. Due to real-time measurements, this process is also much more accurate and safe, with alerts sent to interested parties automatically after paint particles are detected. Photographs with timestamps are saved, so that the precise moment of spattering may be established, and risk of environmental loss be mitigated.

In cooperation with Skywarn Polska (Polish Storm Chasers), LINK4 shares a weather alert system with clients who took out real property and MOD insurance. In the event of a dangerous weather event, Clients receive a text message with a warning and link to a website where they can learn how to safeguard against the adverse impact of respective weather events.