Due to the scope of the PZU Group’s business insurance sector in Poland, the Baltic Countries and Ukraine, mutual and pension funds sector, health business, banking), the main factors that will shape the environment in which the Group operates and that may have a direct or indirect impact on the development and results of the PZU Group in the short term (up to one year), and the medium term (from one to five years), may be divided into the following three categories:
- macroeconomic and geopolitical factors;
- legal and regulatory factors;
- (external and internal) factors specific to individual sectors or businesses in which PZU Group operates.
Macroeconomic and geopolitical factors
The growth rate, level and structure of the key macroeconomic factors in Poland and abroad (GDP, inflation, interest rates) translate into the growth rate of business in all sectors in which the PZU Group operates and their profitability. They determine, directly or indirectly, albeit with a certain time lag, the gross written premium growth rate and insurance revenue in non-life insurance, as well as changes in demand for credit and accumulation of deposits, and inflow of assets into funds. Moreover, they influence the claims ratio in non-life insurance and the investment result. They also shape the fund management fee results and key measures that affect the performance of the banking sector (net interest margin and costs of risk).
In particular, inflation is a factor that strongly affects the insurance business. It raises amounts claimed, costs of claims handling, and costs of business. It also generates a problem for clients related to the depreciation of insurance benefits in long-term products, significantly reduces the real value of life policies and erodes the guaranteed sum in third-party liability insurance (e.g. D&O policies). Inflation and high costs may bring about the risk of underinsurance, present when the declared value of assets (such as movable and immovable property and content thereof) and risks are lower than in reality. When underinsurance arises, the insurer may accordingly diminish the sum they are obliged to pay, accounting for the ratio between the insurance value and the real value of the assets lost. As a consequence, the compensation paid out might not be enough to cover the real costs of restoring the assets insured. This is a particularly significant risk for corporate insurance, which may hinder the restoration of business and cause liquidity and stability problems for enterprises.
GDP growth also translates into individual consumption and domestic demand, and therefore also into spending by households and the corporate sector on the purchase of insurance policies, the sale of loans and related insurance for borrowers. Here, inflation has the inverse effect, affecting real household income, among other things. A slowdown in economic growth generally leads to a deceleration in the growth rate for gross written premiums in non-life insurance, a decline in the demand for life insurance as well as subscriptions and health insurance, particularly within the framework of perks offered by companies. Poorer financial standing of companies and households may result in an increase in credit risk (in particular in the banking segment) and higher loss ratio on the financial insurance portfolio, weakening of the growth rate of new mortgage loans and a weaker growth rate of consumer loans. In addition, rising unemployment and lower employment may also lead to an increase in extortion and insurance crimes.
The economic environment, in particular the actions of the Monetary Policy Council with respect to interest rates and the reserve requirement, play a key role in the functioning of the banking sector. A very low interest rate environment has a negative effect on the sector’s performance by affecting the banks’ net interest income), which could be felt particularly in 2021. An increase in market interest rates, on the one hand, contributes to financial stability, as it promotes improvements in the profitability and financial position of banks and insurers, but on the other hand, it carries risks to financial stability, as it may contribute to a deterioration in the quality of banks’ loan portfolios. Higher yields on bonds measured at arm’s length in portfolios of banks and insurers involve a reduction in their nominal value. The effect for insurance companies of this matter depends on the difference between the duration of assets and equity and liabilities. Furthermore, administrative solutions aimed at lowering the cost of rising interest rates for households (so called moratorium periods) limit the profit of the banking sector.
The economic situation in 2025 will continue to be largely shaped by geopolitical factors, including the still unresolved Russia-Ukraine armed conflict, and continuing tensions in the Red Sea region, though probably on a smaller scale.
Potential escalation in the aforementioned areas could generate price shocks in the food, gas, oil, and commodity markets that are difficult to predict. Geopolitical risks are also associated with the intensification of the rivalry between the U.S. and China, and more broadly with the fragmentation of economic cooperation and the ongoing erosion of multilateralism. These processes may be intensified as a result of Donald Trump's victory in the U.S. election, who advocates a faster pace of deglobalization and tariffs. The competition will also have a strong technological dimension. All these factors may significantly affect the situation on the Polish stock market, the exchange rate of the zloty, and the yields of Polish securities.
The key macroeconomic risks in 2025 still relate to inflation. Forecasts predict a temporary increase in the index in the first half of the year. The shape of the path of inflation will depend on a number of factors, including the extent to which wage pressures have cooled, changes of the exchange rate in the face of rising interest rate disparity, and further regulatory decisions relating to the price of energy carriers. It may also be important how much demand accelerates, although, according to forecasts, the assumed improvement in this area is mainly related to a rebound in EU co-financed investment demand. The expected acceleration in consumer demand growth is relatively smaller.
Continued weakening of economic activity in the external environment will be another significant risk. Problems with the competitiveness of the European economy, political tensions within the EU, including those related to the early parliamentary elections in Germany, and the direction of further decisions by Donald Trump’s administration and possible consequent trade wars could strongly limit the Old Continent’s growth prospects. Weaker GDP growth rate in Poland’s trading partners may in effect mean slower GDP growth than expected in Poland.
Data for the Polish economy
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025* | |
|---|---|---|---|---|---|---|
| Real GDP growth in % (y/y) | (2.0) | 6.9 | 5.3 | 0.1 | 2.9 | 3.8 |
| Household sector consumption growth in % (y/y) | (3.4) | 6.2 | 5.0 | (0.3) | 3.1 | 3.9 |
| Growth in gross fixed capital formation in % (y/y) | (3.0) | 1.5 | 1.7 | 12.6 | 1.5 | 8.0 |
| Consumer price growth in % (y/y, annual average)” | 3.4 | 5.1 | 14.4 | 11.4 | 3.6 | 4.3 |
| Nominal wage growth in the national economy in % (y/y) | 6.2 | 8.7 | 12.0 | 13.1 | 13.6 | 7.0 |
| Unemployment rate in % (end of period) | 6.8 | 5.8 | 5.2 | 5.1 | 5.1 | 5.1 |
| NBP base rate in % (end of period) | 0.10 | 1.75 | 6.75 | 5.75 | 5.75 | 5.00 |
Source: Statistics Poland/PZU Department of Macroeconomic Analyses
Legal and regulatory factors
The PZU Group’s activity and operations are subject to the impact of both national regulations and European legislation.
Insurance
From the point of view of the insurance business, legal regulations and case law affecting premiums, claims paid and other costs, distribution and coverage are particularly important.
In 2025, the insurance industry will be facing increasing regulatory challenges, especially in the context of EU regulations on Solvency II, IRRD or AML. This will mean having to adapt practices to the new regulations and may involve necessary investment in advanced IT systems.
The most important aspect in motor insurance will be the implementation of the provisions of the Act Amending the Mandatory Insurance, Insurance Guarantee Fund and Polish Motor Insurers’ Bureau and the Act on Insurance and Reinsurance Activity.
In early 2025, the KNF will submit a draft recommendation on insurance distribution for public consultation. According to the announcement of the supervisory authority, the recommendations will address the value of the product to the customer and how to perform the customer needs analysis – its procedure, form, documentation. In addition, the recommendations are to include, among other things, rules for the organization of distribution activities, cooperation with intermediaries, the obligation to adequately supervise agents and OFWCA. The recommendations will be applied to both individual and group insurance contracts.
In addition, the insurance sector in the European Union will face significant changes in 2025 due to the evolving regulation of sustainable financial products. The current regulatory framework, in particular the Financial Services Sustainability Disclosure Regulation (SFDR), focuses on classifying products as “light green” Article 8) or “dark green” Article ), which does not fully address transitional products that play a key role in the transition to a sustainable economy.
In response to these shortcomings, the European Commission plans to propose changes to the SFDR in 2025. They will aim to cover transition products more comprehensively. This is in order to create a more flexible labeling system that reflects the diversity of sustainable investment strategies and supports a smooth transition towards sustainable practices. The European Insurance and Occupational Pensions Authority (EIOPA) had consultations on changes to SFDR’s Regulatory Technical Standards (RTS), seeking to harmonize them with existing regulations and ensure consistency in the approach to sustainable product disclosure.
For insurers, this means adjusting product strategies and reporting processes to meet the new requirements. Introducing a more varied classification of sustainable products will allow the offerings to better reflect sustainability, but will require updating internal procedures and information systems. Furthermore, it will be necessary to train staff on the new standards and ensure compliance with the new supervisory requirements.
In 2025, Poland’s insurance sector will have to adapt to the growing demands of sustainable financing in accordance with the EU Taxonomy, in particular by integrating the Green Asset Ratio (GAR) into its operations. It reflects the share of environmentally friendly assets in a financial institution’s total assets, which is crucial for assessing commitment to sustainability. So far, this ratio has been mainly used in the banking sector, but its importance is also growing among insurers, who are increasingly including sustainable financing in their business strategies, thereby helping to protect the environment and improve the quality of life in the communities in which they operate.
Although EU regulations, such as Solvency II, the AML, or the IRRD, are to be in force as of 2027, they will already have been analyzed and worked on to prepare PZU for their application, which requires committing adequate resources and making preparations to implement changes in systems.
Banking
An important factor affecting the banking sector's profit is the contribution to the Bank Guarantee Fund (BFG).
After a two-year hiatus, the BGF resumed collecting the banks' guarantee fund contributions. As a result, the total contribution to the BFG for banks in 2025 increased by 73% to PLN 2.7 billion, the highest in five years.
Rulings of the Court of Justice of the European Union (CJEU), the Supreme Court or other state institutions will continue to be key, particularly on foreign currency mortgages, free credit sanctions and cash loans. On 13 February 2025, the CJEU ruled in case number C472/23 on aspects of the application of free credit sanctions, leaving a wide margin of discretion to national courts hearing individual cases. Case law on CHF loans remains unfavorable for the sector. In 2024, the number of lawsuits from customers was increasing, also in cases of loans already paid off. This had an impact on the banks’ subsidization of reserves. At the same time, banks are trying to reach out more actively to customers with settlement proposals.
Banking activities may also be affected by possible new government programs to support the financial accessibility of housing.
External and internal factors specific to the sectors in which the PZU Group operates
- The greater number of cars and continued traffic may cause an increase in how often claims are made, and consequently an increase in the claims ratio, which will impact profitability of MTPL and MOD insurance;
- Higher growth of new car sales in 2024, mainly in the dealership channel and financed by leasing companies, may result in higher sales of motor insurance;
- Strong price competition in motor insurance and deteriorating result in MTPL and MOD will be reflected in different pricing strategies, thus affecting the market share levels in 2025;
- Changes in trends and behavior of customers looking for personalized offerings and a fast, electronic way to conclude contracts and avail themselves of insurance service are forcing the need to adapt quickly to new expectations in order to maintain a competitive edge;
- Climate change which result in, among other things, a greater range of crop species is grown by agricultural producers, which has a positive impact on crop rotation and biodiversity and may influence the development of subsidized agricultural insurance offerings;
- Repeated and increasingly more unpredictable chance events, such as sudden floods, hail, torrential rains, hurricanes, tornadoes, droughts, and spring frosts, are contributing to increasing claims ratios in the non-life insurance sector;
- The increase in sums insured (due to high inflation and the risk of underinsurance) for corporate as well as individual customers, so that these sums are updated and adjusted to the real value of the property insured will result in an increase in insurance premiums and claims payments that will ensure the full restoration of damaged or lost property;
- The growth of the construction industry, including the increase in infrastructure, mega-investments (nuclear power plant, wind farms in the Baltic Sea, Central Transport Port) and energy transition, in conjunction with the expected inflow of funds from with an expected influx of funds from the National Reconstruction Plan and EU funds for cohesion policy 2021-2027 expected to increase interest in contractual guarantees and construction insurance;
- The development of non-motor insurance offerings by, among other things, providing customers with value beyond just insurance coverage will result in the further development of strategic partnerships between insurers and companies with large customer bases, as well as the creation of customer service ecosystems;
- The increase in the use of technology and artificial intelligence (AI) will result in the rapid growth of the cyber-insurance market, with insurers focusing on offering comprehensive solutions that combine financial protection with prevention and incident response services;
- Better use of data due to technological developments and the use of artificial intelligence (AI) will allow the creation of more precise offerings and a better
adjustment of price to risk, consequently, building a competitive edge, both in compulsory and voluntary insurance.
- An increase in mortality due to an aging population, and emergence of new epidemics or infectious diseases will contribute to an increase in claims and a reduction of the insurance portfolio (a decrease in the number of people insured);
- Demographic changes and the aging society as well as the ensuing changes in the current mortality and fertility levels will lead to developing insurance offerings for senior citizens and higher demand for health and retirement insurance;
- Price pressure, in particular in group insurance, and the competition for client ownership (and client data) might cut the insurer’s margins, reduces the scope (quality) of the product and fostering entry and exit obstacles for clients to overcome with independent intermediaries;
- The recommendations on insurance distribution implemented by the Financial Supervision Commission translate into product value for the client;
- Increasing insurance awareness, changes in client trends and behavior toward personalized life insurance offerings may result in the development of individual insurance, while limiting the potential for the development of group insurance in its current formula;
- Further expansion of private health care as a consequence of the realization of health debt, demographic changes, and the rise in popularity of health insurance;
- Implementation of regulatory projects and higher insurance companies’ operating costs may translate into higher insurance prices;
- Better use of data due to technological developments and the use of artificial intelligence (AI) will allow the creation of more precise offerings and a better adjustment of price to risk, consequently, building a competitive edge.
- Geopolitical tensions, particularly the ongoing Russia-Ukraine, which has a direct impact on the possibility of conducting insurance operations in Ukraine and on their results;
- More intense and increasingly more unpredictable chance events, such as sudden floods, hail, torrential rains, hurricanes, tornadoes, droughts, and spring frosts, are contributing to increasing claims ratios in the non-life insurance sector;
- Changes in trends and behaviors of clients seeking customized proposals as well as an electronic, swift conclusion of agreements and handling of insurance, force insurers to adapt to these new expectations rapidly;
- Increase in insurance fraud cases as a result of the more difficult situation in numerous industries causing growing unemployment.
- High demand for specialist physicians outstripping supply may slow the growth of health care facilities, as well as reduce the margins they achieve;
- Inflationary pressures from affiliate networks and salary pressures exerted by doctors and other personnel serving patients in medical centers may directly affect the financial performance of PZU Zdrowie;
- Wage pressure combined with an increase in demand for medical services may result in limited ability of providing these services in selected medical centers – medical personnel may prefer/accept only facilities that meet higher employee compensation expectations;
- Changes in trends and expectations of clients, causing greater personalization of the offerings, may bring about the need to change processes and systems, which in turn may affect the bottom-line results achieved;
- Decrease in fertility rates, increase in mortality and morbidity rates, as well as the so-called „health debt” being the consequence of the fact that during the pandemic treatments for certain conditions (e.g., cardiovascular and oncology) were delayed, may translate into greater loss ratio in health products (e.g. in subscription plans or in health insurance);
- The constant pressure on price in group insurance limits the ability to sell new health products that are add-ons to group insurance;
- High competition in the health care services market in terms of both price and scope of the services affects the results;
- High saturation of the market in larger cities and also staff shortages and lack of customer potential in smaller towns may slow down the development of the health offering;
- Potential modification of the valuation of outpatient specialist care services by the National Health Fund may cause significant changes in the financial results generated by medical centers;
- Social and economic consequences related to business restrictions due to the possible emergence of new epidemics or the return of the COVID-19 pandemic could result in restrictions on the operation of medical facilities, which could significantly affect their performance;
- Stronger and/or more aggressive policy geared at the development of the network of own facilities by competitors may significantly affect the possibility of acquiring patients or the competitive position of PZU Życie medical operators in the long term.
The condition and performance of the market for investment funds and Employee Capital Schemes will depend mainly on the following:
- planned interest rate cuts, which may favorably impact debt fund valuations. These will become even more attractive to both corporate and individual clients;
- the geopolitical and macroeconomic situation, the fiscal actions of the world’s central banks in terms of interest rates, which will translate into prosperity in the financial markets;
- stability of the legal environment resulting in changes in laws, regulations and other legal acts and guidelines, as well as unforeseen changes in the regulations of the pension system, EPS, ECS;
- Poland’s economic growth dynamics and the performance of listed companies;
- the economic situation of clients and their investment plans in the context of the high cost of servicing their debt associated with the persistently elevated inflation/interest rates.
The main phenomena determining the performance of pension fund market players are:
- the climate on the capital market (in particular on the Warsaw Stock Exchange, which is affected by the geopolitical and macroeconomic situation) which affects the value of the funds’ assets, and the level of fees collected by pension fund companies for management;
- work on enhancing the performance of the third pillar of the pension scheme, thus making it more attractive, and the influencing of the need in public awareness for accumulating additional savings for future retirement. Work on changes to the tax regulations on capital gains tax may also have a significant impact. The scale of the impact will depend on the introduced changes;
- the growing negative cash flow balance between OFE and the Social Insurance Institution (ZUS) results from the fact that cohorts of fund members with the highest volume and the largest accumulated capital are entering the so-called “zipper” mechanism.
The main factors that could affect banking operations in 2025 include:
- the pace of economic growth in 2025, especially individual consumption, which is an important factor in the demand for banking products and the level of risk costs, the economic situation in the European Union, which determines, among other things, the scale of exports of Polish companies;
- the level of inflation and monetary policy – direction and pace of changes in interest rates, which can significantly translate into the level of net interest margins of banks and, consequently, the results achieved by banks, due to the high sensitivity of the banking sector’s results to this parameter;
- the tax and regulatory environment, including in particular the existence of a tax on certain financial institutions, high equity requirements, contributions to Bank Guarantee Fund (BFG), costs of further adjustments to numerous regulatory solutions (e.g. MIFID II, GDPR, PSD II, MREL);
- the financial situation of households and businesses, which will affect the ability of clients to repay their financial obligations on time;
- the scale of demand reported for banking services by clients;
- institutional environment, and potential settlements by the Court of Justice of the European Union, the Supreme Court or other state institutions in particular on foreign currency mortgages, free credit sanctions and cash loans;
- the introduction of a government program to support the housing market;
- ongoing consolidation and restructuring processes in the banking sector;
- reform of the reference index, i.e., replacing the WIBOR index with a new index;
- geopolitical events, including the ongoing armed conflict in Ukraine, conflicts in the Middle East and migratory movements of people;
- development of banking services offered by non-regulated entities;
- the pace of implementation of projects co-financed by EU funds, especially under the National Reconstruction Program.