Products and adaptation to climate change

The PZU Group is aware of the fact that the provision of insurance, banking and investment services is an area in which decisions of individual companies may influence client behaviors and is aware of the bearing they may have on the natural environment. In respect of large clients, such as industrial plants, engineering underwriting is performed to enable the insurer to calculate the premiums. A detailed outcome of the underwriting exercise along with full risk assessment and scenarios are presented to the client. The underwriting covers business risks, which are often combined with environmental risks. For this reason, the actions taken by the client to eliminate or reduce certain elements of its risks, even if induced solely by an attempt to suppress insurance costs, contribute to diminishing the risks to the environment or humans.

The PZU Group participates in social dialogue and debates on sustainable development. As part of the Climate Summit (COP24) organized under the auspices of the United Nations, the PZU Group was one of the organizers of the City Day. The panel discussion moderated by PZU was entitled “Diagnosing the current state of the natural environment and forecasting changes in its quality”. The topics of other meetings included decarbonization of urban and road transport, adaptation to climate change in urban centers and challenges associated with climate change.

Climate change risk management in the PZU Group

The PZU Group keeps monitoring the activities and initiatives undertaken by financial institutions and international organizations. Among them are the United Nations (UN), the Organization for Economic Cooperation and Development (OECD) and the European Commission.

A key initiative for European insurers is the Climate Agreement entered into by 195 countries in Paris in 2015. Its provisions include the disclosure and management of risks related to climate change in the financial sector, including recommendations issued by the Task Force on Climate-Related Financial Disclosures (TCFD). In turn, from the perspective of limiting natural disasters, the point of reference is the “Action Plan on the Sendai Framework for Disaster Risk Reduction 2015-2030,a disaster risk-informed approach for all EU policies”.

Regulations requiring that climate change risk be taken into account in the business of financial institutions, including insurance companies, have also been developed by the European Commission. For several years now, organizations doing business in the financial sector have been gradually withdrawing from providing funding or insuring coal and energy companies and projects. It is expected that the financial sector will provide increasing support to real sectors of the economy, especially power generation, transport and industry, in reducing climate change caused by greenhouse gas emissions.

In Poland, the potential impact of climate change in the coming decades will result from a combination of the following two factors:

• Exposure to climate risks of a physical nature. According to scientific research, floods and cyclones are the most serious risk factors in Poland. In recent years, the risk of heat waves has also emerged. Climate change affects the frequency and scale of potential catastrophic events that may exert a significant impact on the capital position in the insurance sector.
• Sensitivity of the country to changes and events related to the climate and resulting from such factors as population density in high flood risk areas, transport infrastructure quality, water management and funds earmarked in the state budget for unexpected expenditures.

These two factors, combined with the country’s adaptability, including those of the public sector (central and local governments), companies and citizens, the health condition and the place of residence, will define the resilience of both the country and the PZU Group’s clients to climate change.

The PZU Group takes a number of initiatives to boost the resilience of both country and its clients to climate change. 
This is done by:

• improving the recognition of exposures to climate risks of a physical nature,
• supporting the enhancement of adaptability and social awareness.

Source: Prepared based on World Bank (2010), Adapting to climate change in Eastern Europe and Central Asia, Washington D.C.

PZU manages its indirect impact on the natural environment through the insurance products it offers:

The PZU Group’s insurance business is aimed at offering insurance products tailored to the needs of both individual and corporate clients in various sectors of the economy. The Group’s highest priority is to properly respond to the current needs of the Polish market and economy in accordance with national and EU regulations (including those safeguarding the principles of fair competition and permitting cooperation only with those business clients whose activity, according to PZU’s knowledge, complies with the applicable laws). The complexity of needs, and - consequently - of the offer, has led PZU do provide, inter alia, insurance cover to entities in the mining and power sectors. Besides traditional operations based on coal, clients from this group also develop their activities in the area of renewable energy sources. The PZU Group plans further development of policy and practices in the area of indirect environmental impact, abiding by sectoral trends and the specificity of Polish economy.