We consider a set of security and privacy problems under reliability and storage constraints that can be tackled by using codes and particularly focus on the secret-key agreement problem. Polar subcodes (PSCs) are polar codes (PCs) with dynamically-frozen symbols and have a larger code minimum distance than PCs with only statically-frozen symbols. A randomized nested PSC construction, where the low-rate code is a PSC and the high-rate code is a PC, is proposed for successive cancellation list (SCL) and sequential decoders. This code construction aims to perform lossy compression with side information, i.e., Wyner-Ziv (WZ) coding. Nested PSCs are used in the key agreement problem with physical identifiers and two terminals since WZ-coding constructions significantly improve on Slepian-Wolf coding constructions such as fuzzy extractors. Significant gains in terms of the secret-key vs. storage rate ratio as compared to nested PCs with the same list sizes are illustrated to show that nested PSCs significantly improve on all existing code constructions. The performance of the nested PSCs is shown to improve with larger list sizes, unlike the nested PCs considered. A design procedure to efficiently construct nested PSCs and possible improvements to the nested PSC designs are also provided.