Susep publishes regulatory framework for sustainability
With a focus on ESG best practices, Circular nº 666 provides for the sustainability requirements to be observed by companies
On June 27, 2022, Susep (Superintendence of Private Insurance) published Circular No. 666, which provides for sustainability requirements to be observed by insurance companies, open private pension entities (EAPCs), capitalization companies and local reinsurers.
The concern with sustainability and ESG practices (the term “Environmental, Social and Corporate Governance”, which, translating the acronym from English into Portuguese, means Environmental, Social and Corporate Governance) is not new, but from the signing of the Agreement of Paris, in 2015, definitely entered the agenda of financial regulators and supervisors around the world. Most of the time emphasizing climate risk and its potential impacts on the stability of the financial system. In Brazil, it is not by chance that the Central Bank, which already had a rule dealing with the subject, had announced a major overhaul of this regulation for last year, which in fact it did.
Briefly, Susep’s standard requires supervisees to implement: management of sustainability risks (environmental, social and climate); sustainability policy; and sustainability report. The management of sustainability risks must be integrated into the Risk Management Structure and operational processes, especially with regard to pricing and risk underwriting, selection of investments and selection of service providers, and may establish limits for risk concentration and/or restrictions on doing business.
The sustainability policy aims to ensure that sustainability aspects are considered when conducting business and in the relationship with stakeholders, and must be implemented through concrete actions, at least with regard to the offer of products and services and the performance of activities and operations. The sustainability report promotes the disclosure, to the general public, of the actions related to the sustainability policy and of the most relevant aspects related to the management of sustainability risks.
The requirements of the Circular are mandatory. In the case of supervised bodies that eventually fail to comply with the provisions of the Circular, Susep may apply the sanctions provided for in the regulation, or, alternatively, request plans to correct the deficiencies found.
The primary objective is to promote the resilience of the insurance market, through better risk management (short term) and the consideration of aspects related to sustainability in the supervised body’s strategy (long term). In addition, Susep believes that the insurance sector will contribute to the dissemination of sustainable practices to other sectors of the economy, in view of the roles it plays as a manager/risk taker and institutional investor.
For the director of Susep, José Nagano, the level of maturity with which the companies dealt with and developed actions on the subject was very different. “What some companies did as a differential, will now be standard in the market. We will make great strides in sustainability in insurance.”