Photo credit: Stora Enso
The forest industry works to answer global challenges such as rising raw material costs, stricter sustainability demands, and the need for new renewable products. Therefore, having a reliable method to keep insurance values up to date as well as acquiring new replacement values for physical assets like buildings, machinery, and equipment, is critical in an industry that is going through rapid transformation.
For global players like Stora Enso, managing risks and ensuring that assets are correctly valued and insured at up-to-date replacement value has never been more important. One solution that has provenvaluable is the AFRY Block Valuation model. Used in partnership with If, it provides accurate and consistent replacement values in pulp & paper and sawmill industry facilities.
The forest industry is facing a period of profound change. According to Sami Silvennoinen, Director of Risk Management at Stora Enso, several challenges stand out:
At the same time, opportunities are emerging: the replacement of fossil-based plastics in packaging, new recycling technologies, bio-barriers for liquid packaging, wood-based carbon materials for batteries and the increasing use of wood in high-rise construction. As Silvennoinen points out, “These advances are crucial in addressing sustainability demands while opening new growth areas for the industry."
For a global company like Stora Enso, it is essential to manage insured values and property and business interruption insurance coverage consistently across all business areas and units. The AFRY Block Valuation tool provides a standardised, reliable basis for calculating replacement costs of mills and production facilities.
Silvennoinen highlights several clear benefits of using AFRY Block Valuation. One of the most important is consistency across the group, as the same tool is applied in all Stora Enso business areas except corrugated board, ensuring comparability and reliability of values. It also provides security for insurers, who can trust that property sums insured for physical assets are based on robust, industry-standard calculations.
Another strength is the integration of new investments: major CapEx projects can easily be added into the valuation process by updating increase in design production capacities or changes in main equipment and machinery or buildings, avoiding gaps or outdated figures.
Finally, the tool supports long-term planning, as the replacement values serve as a base in Stora Enso’s Asset Mapping tool for strategic asset replacement investment planning. With property assets valued at several billion euros through the Block Model, the scale is considerable.
“Without the Block Valuation, we would have to rely on costly appraisal companies every few years or maintain manual updates in spreadsheets,” Silvennoinen notes. “It would mean a lot of manual work and follow up of several induct cost indices without this valuation method. In fact, many other industries – such as steel, oil, and others - have observed that the forest industry has a more systematic way of maintaining property insurance values.”
Although the AFRY Block Valuation is highly effective, Silvennoinen also sees areas where it could be further developed. One improvement would be in the templates used to collect production capacity, new equipment, and machinery data from the production units. Progress has already been made with non-calculating block spreadsheets, which makes it easier to request and share updates, but there is still room to streamline the process further. Another area is the delivery speed of updated cost indices from AFRY, which often lags behind and can delay the reflection of current values.
This is essential, especially at the end of the year, as Stora Enso’s property renewal date will be 1 January and new property values should be updated at the latest during November. Silvennoinen also emphasises the need for more trained risk engineers across different markets, ensuring that the service can be provided consistently. Finally, he highlights the importance of clearer guidance on manual adjustment factors — for example, how to take into account spare parts, infrastructure, local labour or the share of local sourcing when applying the model.
As sustainability regulations tighten — from the EU’s Packaging and Packaging Waste Regulation (PPWR) to the Deforestation Regulation (EUDR) — accurate valuation and risk management are becoming even more critical. Clients are supported with tools, expertise and training to meet these evolving needs.
Silvennoinen reflects on his long history with the tool, dating back to the late 1990s when he joined Industrial Insurance (Teollisuusvakuutus Oy) in Finland as a young and eager engineer. “The Block Valuation has been an integral part of how we manage our assets for decades. It gives us confidence that our insurance values are correct and that we are well-prepared for the uncertain future.”