In 2022, the regulatory changes most significant for the PZU Group included the amended Road Traffic Law, the introduction of the recommendation of the Polish Financial Supervision Authority concerning motor insurance claims handling, the adoption of the Act on social funding for economic ventures and borrower assistance, and the so-called Polish sanctions act in relation to the war in Ukraine.
On 1 January 2022, the decision of the Polish Financial Supervision Authority of 15 August 2021 on prohibitions on marketing, distribution and sale of insurance-based investment products -life insurance contracts, if they are unit-linked (so-called product intervention) came into force.
Among other things, the decision prohibited the marketing, distribution and sale of unit-linked life insurance contracts for which the average return is less than 50% of the interest rate for the period specified in the decision in line with the relevant risk-free rate term structure. The product intervention does not apply to enrolment in group insurance concluded before 1 January 2022, and does not apply to Employee Capital Schemes, Employee Pension Schemes, Individual Retirement Security Accounts and Individual Retirement Accounts. PZU Życie has implemented the necessary measures that ensured adaptation to the product intervention, in particular it assured that the product offer updated since 1 January 2022 included solely and exclusively products that meet all the criteria set forth in the decision issued by the regulatory authority.
In relation to Russia’s aggression in Ukraine which commenced on 24 April 2022, 16 April 2022 saw the entry into force of the Act on specific solutions to prevent the support of aggression in Ukraine and protect national security (so-called Polish sanction act), which provides for criminal and administrative liability for failure to apply or violate sanctions and restrictions imposed by the European Union or the Republic in Poland in relation to Russia’s aggression in Ukraine. At the same time, April 2022 saw the publication of the first Polish sanction list. In effect, the new provisions had a significant impact on the activities of the PZU Group as regards the identification of sanction risk and reputational risk related to granting cover for persons and entities sanctioned, or persons or entities related thereto. This act, along with EU sanction regulations (including those in the US and the UK) means that it is all the more important for companies to identify and implement various sanctions in their activities, so as to avoid the risk of bearing the penalties due to non-compliance.
Since 29 July 2022, the Act of 7 July 2022 on social funding for economic ventures and borrower assistance has been in force.
Under this act, mortgage borrowers gained the right to suspend the payment of up to eight mortgage loan instalments throughout 2022 and 2023, this being called a “loan repayment holiday.” Because of the decrease in interest revenue in this respect, for this purpose, banks created provisions of 50% to 85% of the full revenue on loan repayment holidays, depending on the participation levels assumed. Pursuant to this act, lenders were also obliged to pay an additional total of PLN 1.4 billion to the Borrower Support Fund by 31 December 2022.
The Recommendation of the Polish Financial Supervision Authority on motor insurance claims handling entered into force on 1 November 2022. The Recommendation covers such questions as timely payment of benefits, payment of benefits in line with the principle of full compensation, compliance with disclosure obligations towards authorized entities, supervision and review over the claims handling process on the part of insurance company authorities, internal review during the claims handling processing, as well as supervision and review of insurance companies over external entities entrusted with claims handling activities. Some of the provisions included in the Recommendation are controversial, such as no option to apply discounts and rebates when the cost estimate claims handling method is applied for motor third party liability insurance.
Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment (“taxonomy”) has been in force, in principle, since 1 January 2022. The regulation sets out the criteria against which „green” financial products can be built. It also introduces the need to use labels in information about the products offered that indicate whether or not we are dealing with a product taking account of the taxonomy. In addition, a company that is required to publish non-financial information will be required to include in its non-financial statement or consolidated nonfinancial statement information on how and to what extent its business relates to economic activity that qualifies as environmentally sustainable.
On 1 January 2022, delegated acts to the taxonomy also came into effect:
- Commission Delegated Regulation (EU) 2021/2178 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/ EU concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation;
- Commission Delegated Regulation (EU) 2021/2139 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to climate change mitigation or climate change adaptation and for determining whether that economic activity causes no significant harm to any of the other environmental objectives.
On 6 April 2022, the European Commission adopted the technical standard for Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector (SFDR), specifying the content, methodologies and presentation of information in relation to sustainability indicators, products which promote environmental or social characteristics (Article 8) and products which have sustainable investment as their objective (Article 9). This act constitutes a key guideline for the scope and manner of presentation of disclosures required by SFDR. Regulatory technical standards (RTSs) came into force on 1 January 2023.
On 2 August 2022, amendments to the following regulations entered into effect:
- Delegated Regulation (EU) 2015/35 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). In accordance with the amendments, insurance undertakings will have to reflect, among other things, sustainability risks in their system of governance. The risk management function will be required to identify and assess risk to sustainable development, while the actuarial function will be obliged to consider the risk to sustainable development in assessing the uncertainty associated with estimates made in calculating technical provisions;
- Commission Delegated Regulation (EU) 2017/2358 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to product oversight and governance requirements for insurance undertakings and insurance distributors. The amendments include testing the product on whether it meets the sustainability goals of the target group customer;
- Commission Delegated Regulation (EU) 2017/2359 supplementing Directive (EU) 2016/97 of the European Parliament and of the Council with regard to information requirements and conduct of business rules applicable to the distribution of insurance-based investment products. In this case, the amendments include, among other things, obtaining information from the client to assess whether the product meets the client’s sustainability preferences and offering a product that meets the client’s sustainability preferences.
On 16 December 2022, the text of Directive 2022/2464 as regards corporate sustainability reporting (Corporate Sustainability Reporting Directive – CSRD) was published. Its provisions supersede a series of solutions relating to so-called non-financial reporting, included i.a. in Directive 2014/95/ EU (Non-Financial Reporting Directive – NFRD). By 30 June 2023, the European Commission is to present delegated acts to the directive, under which uniform European Sustainability Reporting Standards ( ESRS). The first group of obligated entities will have to make its sustainability reports in line with CSRD for 2024 (further large undertakings for 2025, whereas listed SMEs for 2026).
1 January 2023 saw the entry into force of most provisions of the amended Act on Complaints Handling by Financial Market Participants and on the Financial Ombudsman, which increases the maximum financial penalty the Ombudsman may impose on financial market participants who hinder complaints filing from PLN 100,000 to PLN 1 million. The Ombudsman’s competences are also stronger, now that they may participate in civil proceedings involving customers of financial institutions and their successors.
16 January 2023 was the day Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience for the financial sector (DORA) came into force. The objective of the new provisions is to increase information security of financial operators such as banks, as well as insurance and investment companies. The entities subject to DORA have until 17 January 2025 to adapt to the new requirements.
On 13 January 2022, in the case under file no. III CZP 61/22, the Supreme Court passed a resolution stating that the statute of limitations for claims of consumers being the insured or the policyholders in respect of the recovery of sums wrongly paid related to the insurer’s collection of fees that do not constitute costs of insurance cover during the term of the unit-linked life insurance contract pursuant to abusive clauses may not commence before the consumer learns or, to reasonably put it, should learn that the given provision is abusive.
On 14 January 2022, in the case under file no. III CZP 7/22, the Supreme Court passed a resolution under which an insurance company’s liability arising from a third party insurance obligatory for owners of motor vehicles also covers claims incurred due to the operation of a device installed in the vehicle, also if during the incident the vehicle was not in traffic.
On 20 January 2022, in the case under file no. III CZP 9/22, the Supreme Court passed a resolution stating that the perpetrator of a traffic accident and insurance company with which the perpetrator has concluded a motor vehicle third party liability traffic accident insurance contract are liable towards the administrator of the roads for damage caused to road pollution because of engine fluids.
On 18 February 2022, in the case under file no. I SNN/c78/21, the Supreme Court granted the extraordinary appeal of the Prosecutor-General against the final and non-appealable ruling of the Regional Court in Szczecin of 17 August 2017 and remanded the case back for reconsideration. The Supreme Court sees no doubt that claims to which a person is entitled from the insurer under a third party liability insurance for damage to a motor vehicle is not limited to the equivalent of the expenses incurred to repair the vehicle, but also to the equivalent of hypothetical expenses of restoring the vehicle to its original condition, and shall from time to time cover necessary and economically reasonable costs of repair.
On 6 October 2022, in the case under file no. III CZP 119/22, the Supreme Court adopted a resolution in which it expressed its opinion on the question of deducting discounts and debates obtainable under cooperation between the victim and the insurer in the claims handling process from the claim amount payable under an obligatory motor vehicle third party liability insurance for damage arising in traffic. The Court found that the claims payable from the insurance company pursuant to a motor vehicle third party liability insurance for traffic accidents involve solely the necessary and economically reasonable costs of repair. Therefore, the insurance company may account for the discounts and rebates in the claim amount paid, provided that in the given matter, it will be possible to assume that these are within the scope of or even constituent for the necessary and economically reasonable costs of repair.
On 8 December 2022, in the case under file no. II CSKP 726/22, the Supreme Court dismissed the cassation appeal brought by the owner of a vehicle damaged in a traffic accident in the matter concerning the insurer’s payment of a claim amount calculated under the so-called cost estimate method as the equivalent value of restitution expenses (incurred to restore the vehicle to its original condition). The justification of the ruling pointed to the claims being dynamic, and the claims amount may change over time relevant to the circumstances following the accident. Compensation claims arise within the victim’s assets when damage arises, but is not subject to petrification and is not a fixed and stable asset. On the contrary, if the victim pursues compensation within court proceedings, damages awarded cover the damage existing at the date the trial is closed. The Court also indicated that claims calculated under the cost estimate method is usually higher than claims determined under the differential method, and after the claims are paid there is no option to review the way under which the financial resources are spend, including to verify whether they were used to finance the repair. In consequence, contrary to the principle of damage compensation, the victim’s assets are in a better position than before the accident; the victim receives a financial “excess” as a result of the value of damage arising from the motor accident being lower than the amount paid as equivalent to costs (ultimately not) incurred for restitution.