The insurance sector has always been based on predictability, but what happens when the unpredictable becomes the norm?
Generally speaking, insurers typically set premiums for their policies (which may cover cars, travel, equipment, property, agricultural activities, etc.) based on the damage they expect from analyzing historical patterns. In other words, based on evaluations of what has already happened, they determine how much they will pay out to a policyholder in the event of a claim.
A growing problem in this pricing model is global warming, which has become increasingly unpredictable due to the rise in extreme weather events happening more frequently (ranging from droughts and excessive heat to hailstorms and flooding).
This phenomenon is linked to the increase in global average temperatures, largely driven by human activity, and has been impacting insurers more and more. According to data from the Financial Times, by 2010, losses caused by nature-related events reached US$100 billion globally in very bad years, and since 2020, this figure has been reached annually. In other words, what used to be rare is now becoming the norm.
In this context, the insurance sector faces concrete challenges:
- Higher premiums reflecting greater exposure to environmental risks
- Increased demand as extreme events drive the search for coverage
- Reduced coverage and contract revisions due to the rising costs of indemnities
- Difficulty in pricing, as historical data is no longer sufficient to predict future losses
The Regulatory Response: SUSEP Circular 666/2022
SUSEP (Superintendence of Private Insurance), the body that regulates insurers in Brazil, in response to these challenges and in alignment with other regulators worldwide, approved Circular 666 in 2022. This regulation mandates insurers, open supplementary pension entities (EPACS), capitalization companies, and local reinsurers to adopt mechanisms for managing sustainability risks (environmental, social, and climate-related), sustainability policies, and sustainability reporting.
The Circular encompasses three main phases:
- Sustainability Policy
- Management of Social and Environmental Risks and Materiality Study
- Sustainability Report
Phased Implementation: The Final Phase is Approaching
SUSEP established a progressive implementation timeline, considering the size and complexity of the entities under supervision:
Sustainability Policy
Segment S1: By December 31, 2022
Segment S2: By February 28, 2023
Segments S3 and S4: By April 30, 2023
Risk Management and Materiality Study
Segment S1: By December 31, 2023
Segment S2: By February 28, 2024
Segments S3 and S4: By April 30, 2024
Sustainability Report
Segment S1: By April 30, 2024
Segments S2, S3, and S4: By June 30, 2025
Standard Tables and Regulatory Transparency
In addition to the guidelines launched in 2022, on April 25, 2023, SUSEP released “Standard Tables,” which summarize the information that must be included in the Sustainability Report of the supervised entities.
The Standard Tables will be incorporated into the Sustainability Report, which must be constructed based on the Task Force on Climate-related Financial Disclosures (TCFD), and will allow consumers, investors, and SUSEP to compare the management of sustainability risks and sustainability policies among the supervised entities.
According to the regulation, each entity must prepare and disclose the report by April 30 of each year.
As the final stage of the Circular approaches for segments S2, S3, and S4, it is urgent to establish processes for obtaining, monitoring, and reporting data.
How is your preparation going?
The reporting process based on Circular 666 can become a challenge if a proper step-by-step approach is not adopted.
Therefore, if you have not yet started or completed this step, now is the time to act.
Compliance with regulatory guidelines is a matter of compliance—i.e., a requirement to operate in the sector.
Given that time is running out, here are the essential priorities at this moment:
-> Review the ESG Governance Structure – integrate sustainability into corporate strategy
-> Review/Complete the Materiality Study – identify and prioritize environmental, social, and climate risks
-> Create processes for monitoring and measuring ESG data – ensure reliable and auditable metrics
-> Collect data from internal and external sources – engage suppliers, clients, and stakeholders to consolidate information
-> Structure the disclosure of ESG data – following the SUSEP Standard Tables model
-> Prepare the Sustainability Report – ensuring alignment with TCFD and regulatory transparency
Strategically prepare to avoid missing the final deadline! Regulatory rigor is increasing, and the time to structure, monitor, and report your ESG strategy is now.
Guest Author – Camila K Lucchese
I am a lawyer with a Master’s degree in International Law and International Organizations from the University of Paris 1 Panthéon-Sorbonne, and I specialize in Public International Law from the University of Paris 2 Panthéon-Assas.
I work as a consultant in sustainability/ESG in the areas of management, diagnostics, materiality analysis, action plans, report writing, and also in the development and monitoring of projects in the Social and Governance areas. I conduct corporate education training and give lectures on the topics mentioned.
I am a professor of ESG in the Risk Management, Compliance, and Auditing course at Pós-PUCPR Digital. I hold certifications in Compliance, ESG, GRI Reporting with 2021 updates, Integrated Reporting with SASB, GRI and SASB Materiality, Corruption, and Due Diligence in the value chain.
