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 offer. The PZU Energia Wiatru (PZU Wind Power) and PZU Energia Słońca (PZU Solar Power) policies are twin 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 designed to generate energy (the PZU Wind Power: gondolas, towers, foundations, internal cabling and the PZU Solar Power: 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 including the offer 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, Siła Wiatru (“Power of the Wind”) and for photovoltaic installations, Moc Słońca (“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.

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 its 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.

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 its 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:

• optimize and make accurate the level of consumption of plant protection products per hectare of crops;
• reduce the number and costs of plant protection treatments;
• allow the use of natural or mechanical plant-care procedures instead of spraying;
• provide access to several dozen 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.

PZU 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 (in 2021-2022) 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. Within the pilot in 2022, 13 clients reported a reduction in CO₂ emissions by 35 tons

The growing interest in electric vehicles on the part of car fleets, arising from changes in EU 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 being 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 Eko Energia (PZU Eco Energy), is a solution addressed to, i.a., households as well as small and medium enterprises and farms which use photovoltaic cells, solar thermal collectors or heat pumps to generate energy for their own use. The insurance is available in three variants, and clients 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 damage 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.

PZU offers a new scope of motor own damage insurance for the owners of electrical vehicles. It covers damages to chargers, including a wallbox and charging wires and the battery. This responds to the growing popularity of electrical vehicles. As shown by the Polish Association of Alternative Fuels, as at the end of October 2022, there were 56.9 thousand personal cars and 2.6 thousand delivery cars and trucks with electric drives registered in Poland (59.5 thousand in total). This represents a 72% increase against the corresponding period in 2021, whereas the increase in personal cars was 39%, and as much as 137% in delivery cars and trucks. The number of electric buses, mopeds and motorcycles is also growing. This new clause means that the owners of electrical vehicles who buy a motor own damage policy 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 sum insured for cables and batteries is specified in the MOD insurance agreement. For a charger it is set separately and totals PLN 3,000. The development of charging infrastructure is conducive to the growing number of vehicles. Figures as at the end of October 2022 show that users of plug-in cars in Poland have 2,494 publicly available charging stations across the country (4,821 points), and only in October, 34 new publicly available charging stations (83 new points) were launched. Forecasts say that the number of electric vehicles will rise eightfold compared to 2022 by 2025. Therefore, it is extremely important to further develop the publicly available charging structure, especially for delivery cars and trucks, which will affect the further development of PZU’s offerings.

The PZU Group sees to it that the environmental impact of its product is limited not only in the process of creating and offering them, but throughout its 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. PZU’s 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 response to the growing environmental and climate awareness of individual investors, PZU Group companies are introducing products in its offer that allow them to invest in sustainable projects.

TFI PZU offers an investment product which promotes the environmental aspect referred to in Article 8 SFDR (Regulation 2019/2088 on sustainability-related disclosures in the financial services sector), i.e., the so-called light-green product. inPZU Akcje Sektora Zielonej Energii is a subfund within inPZU SFIO which acts an indexation fund that aims to reflect the mix and reach the return rate equal to the MSCI Global Alternative Energy Net Return Index. TFI PZU analyzes whether it is possible to introduce further similar funds in its offering, so that investors can enjoy a broader range of investment products in line of the ESG trend.

Pekao TFI offers the Environmental Pekao subfund, oriented towards supporting sustainable investment. Companies from environmentallyfriendly and pro-ecological sectors were selected as part of its portfolio (renewable energy, electromobility, energy efficiency, recycling and waste management). When analyzing their selection, on top of financial factors, ESG issues were equally important, namely environment, social and governance-related aspects.

PZU Group banks are engaged in efforts to support SME clients on their path towards climate neutrality. Alior Bank offers Biznes Kredyt Zakupowy, a loan to implement environmental initiatives. This loan is for commercial undertakings in the micro company and small and medium enterprise segment that plan to roll out modern tools to minimize the adverse impact exerted by a company’s business on the natural environment. The loan funds may be designated, among other things, to purchase and assemble photovoltaic panels, purchase ecological cars with an electrical or hybrid engine, thermal modernization of real estate or the purchase and assembly of a new source of heat. The collateral for the loan is the guarantee of Bank Gospodarstwa Krajowego: a de minimis guarantee and bills of exchange for Alior Bank and Bank Gospodarstwa Krajowego.

PZU Group banks have prepared a special credit offering for individual clients. In 2022, Alior Bank continued to offer „Czyste Powietrze” (“Clean Air”) Cash and Installment Loan to finance, among other things, the replacement of old heat sources, purchase and installation of new heat sources, thermal modernization of single-family buildings, and purchase of photovoltaic installation together with new heat sources. The Environmental Loan – a special loan for clients planning to purchase a new electric vehicle – was offered until the end of May 2022.

In 2022, Bank Pekao offered Express Loan for environmental purposes, such as renewable energy sources, purchase of central heating boilers, windows, doors, or materials for thermal insulation. The loan could also be used to finance the purchase of personal cars with electric or hybrid drives, or mopeds and motorcycles with electric drives, electric bikes, as well as to refinance the purchases made since the beginning of 2021. The Bank also offered EKO Kredyt Mieszkaniowy (ECO Residential Loan). Financing was available to install solar collectors, photovoltaic panels and heat pumps during the construction or renovation of a property.

• consortium financing for the construction of photovoltaic farms at PLN 779 million;
• financing for the construction of the largest photovoltaic farms at target output of 285.6 MW, at PLN 763 million;
• financing for the purchase and revitalization of magazine parks at PLN 450 million;
• consortium financing for the construction of over 100 photovoltaic farms at PLN 428 million;
• financing for a company belonging to the Bank Pekao group in cooperation with the European Investment Bank at EUR 132 million and the Council of Europe Development Bank at EUR 200 million. In both transactions Bank Pekao serves as arranger and guarantor for financing;
• financing the acquisition of a foreign renewable energy sector company at EUR 131 million. The bank served as MLA;
• financing the leader of the Polish energy industry, as one of its original lenders. The loan amounted to PLN 4 billion;
• financing within an investment consortium for a leading producer and distributor of photovoltaic solutions at PLN 330 million.

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 best 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. Mediumsensitive 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 non-public entities. These methodologies were developed within the PZU Group under the supervision of PZU. Environmental, social and governance issues have been included in the methodology for public companies. The environmental area covers the following topics: greenhouse gas emissions, carbon footprint, impact of operations on biodiversity, energy intensity levels, waste management, current key company-defined environmental risks and their management, adoption of a climate neutrality target and decarbonization strategy. 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 assessment is carried out on the basis of public data, including non-financial reports and strategies, and data from an external provider. The final assessment also depends on the sector in which the company operates. Non-public companies are assessed based on a simplified ESG assessment questionnaire.

The application of the ESG criteria serves the purpose of risk assessment and is not exclusionary for clients. In the following years, further corporate clients will be assessed according to an internal schedule. In addition, proposals for translating ESG assessments into business relationships will be developed in 2023.

ESG strategy indicator: ESG assessment of 55% of the biggest corporate insurance clients from sectors sensitive to ESG risks

Level of implementation 2022: 20% of largest corporate insurance clients sensitive to the ESG risk assessed against ESG factors

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, torrential rain or lightning.

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 business interruption insurance, PZU protects businesses whose profits decline, for instance as a result of damage to their assets caused by fire, flood, cyclone or other random events.

Additionally PZU offers two extended clauses for businesses holding third party liability insurance to cover damage to the environment. The first such clause extends the third party liability insurance cover to include losses arising in connection with the release of hazardous substances into the air, water or soil. The second clause extends the insurance cover to include liability for damage to the environment. Such clauses are offered predominantly to industrial operators, construction companies, utilities, wastewater treatment plants and waste management companies.

In 2022, PZU worked on a new insurance product to provide comprehensive cover for companies against environmental damage. The new solution will promote corporate clients who are aware of their impact on the environment and who are also guided in their operations by the responsibility for the condition of the environment. This is a solution for entrepreneurs who apply adequate safeguards so as not to cause environmental pollution in their day-to-day operations. The product has been in sale since January 2023. Within this insurance, PZU offers to cover costs efforts aimed at restoring the environment to the condition prior to damage. The insurance covers liability for damage to environment, including land, regardless of their ownership; liability for damage to protected species or habitats; costs of remedial action to repair or replace in an equivalent manner the natural components or their functions; costs of prevention or mitigation of damage to environment; third-party liability for recourse claims for costs of prevention and remedial works incurred and reported to the insurer by third parties.

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, in 2022, 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 cyclone and torrential rain risks. By the end of 2022, drones helped to establish the scope of damage in 121 cases.

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 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.