SUSEP submits sustainability seal for public consultation

Deadline for suggestions ends on July 06, 2024

In line with the Ecological Transformation Plan implemented by the Federal Government, the Brazilian Superintendence of Private Insurance (“SUSEP”) placed a draft circular (Notice No. 6/2024/SUSEP) on public consultation establishing parameters for insurance and open supplementary pension products to be classified and traded as sustainable.

The Federal Government’s Ecological Transformation Plan aims to change economic, technological and cultural paradigms in favor of economic development from sustainable relations. To this end, the plan encompasses a set of fiscal, tax, regulatory, and financial measures to encourage that public and private resources are allocated into activities considered sustainable – capable of reducing environmental and climate risks.

This is the context in which – according to the introductory note to the public consultation under discussion – SUSEP published a draft regulation aiming to establish the list of economic activities deemed as sustainable and that can be associated with insurance and open supplementary pension products.

The draft regulation governs the events in which insurers and open supplementary pension entities (“EAPCs”) can associate insurance advertising names and materials or pension plans with “ESG”, “ASG” (Portuguese acronym for ESG – Environmental, Social, and Governance), “environmental”, “green”, “social” or “sustainable” seals.

In this regard, an insurance product can only be classified as sustainable if the coverage, covered assets, rights or guarantees offered are capable of generating climate, environmental or social benefits for policyholders, beneficiaries or society (art. 3).

In addition, both insurance products and plans with coverage for life insurance and open supplementary pension can be classified and traded as sustainable if the resources of the Mathematical Provision of Payable Benefits (Provisão Matemática de Benefícios a Conceder) are invested in Investment Funds (“FIES”) that, according to the Brazilian Securities and Exchange Commission (“CVM”) regulations, can be classified as sustainable, social or ESG-related (Art. 4).

The regulation also prohibits insurance companies and EAPCs from using expressions that mislead insurance proponents or policyholders and pension plan participants as to the sustainable nature of these products, and further establishes that their regulations and contractual conditions must outline (arts. 5 and 7):

1. the climate, environmental or social benefits expected from trading the product;
2. the target audience and its compliance with the coverage offered; and
3. the methodologies, principles and guidelines used to name the plan as sustainable, according to its classification.

Classifying insurance and open supplementary pension plans as sustainable will be the duty of the officer appointed as technical manager for the supervised entity and such activity must be monitored annually by the internal audit of insurers and EAPCs (articles 8 and 9).

Finally, the registration of the insurance and supplementary pension plan with SUSEP must also specify its classification as sustainable (art. 10).

Interested parties can submit comments or suggestions by July 06, 2024, through the Public Consultation System.

Access the circular draft in full.

Demarest’s Insurance, Reinsurance, Health and Private Pension team is monitoring all developments of this public consultation and remains available to provide further clarifications.