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Due to its structure, extent and line of business, the PZU Group was identified by the Polish Financial Supervision Authority (KNF) as a financial conglomerate,
in which PZU is the leading entity – due to its parent status in the PZU Group – and at the same time a regulated entity. Since February 2019 the PZU Group has also been subject to supplementary supervision exercised by KNF.
For a conglomerate to operate efficiently, the PZU Group adopted the allocation of responsibilities and the methods for discharging the duties (individual PZU departments take the responsibility for specific duties). The cooperation and information exchange procedures are regulated by Agreements signed with respective PZU Group entities.
In addition to internal and sector regulations (pertaining to the business profile of individual Group companies), the main legal act regulating conglomerates is the Act of 15 April 2005 on supplementary oversight over credit institutions and insurance undertakings, reinsurance undertakings and investment firms comprising a financial conglomerate. It imposes a number of obligations on the leading entity and the regulated entities of a financial conglomerate, including:
An obligation to maintain the financial conglomerate’s own funds at a level that is not lower than the financial conglomerate’s capital adequacy requirement;
Material intragroup transactions are transactions, whose amount exceeds the threshold specified by a coordinator for the financial conglomerate. The transactions cannot pose a threat to financial stability of regulated entities forming part of the conglomerate;
The content of this obligation is comprised of PZU’s obligation to disclose each instance of a significant risk concentration, to collect ongoing information on each occurrence of a significant risk concentration and significant risk concentration reporting to KNF for the calendar year;
PZU is obliged to develop and implement an appropriate risk management system that covers all the regulated entities of the financial conglomerate;
Which are defined as the obligation to introduce capital adequacy procedures enabling the determination and measurement of the risk level and calculation of an appropriate level of own funds or own resources for this risk, introduction of information and accounting procedures enabling effective identification and monitoring of intragroup transactions in a financial conglomerate as well as significant risk concentration instances and ultimate introduction of an internal control procedure that ensures effective collection and disclosure of any data and information that may be significant for supplementary supervision purposes.;
That PZU performs in respect to regulated entities and to the KNF.
Of particular importance for the insurance segment is the cooperation between PZU and PZU Życie, which operate with shared structures, especially in terms of strategic management and risk, as well as operational support.
The management and supervision processes over other Group companies exercised from the parent company level are supported by internal formal solutions that are complementary to regulatory requirements and, at times, are designed to fill in legislative loopholes. For instance, they take the form of cooperation agreements and area-specific policies and procedures issued on their basis. Within the framework of this cooperation, representative organizational structures also exist, and their task is to develop and implement uniform solutions across the PZU Group.
