CIRCULAR SUSEP NO. 666, OF 27 JUNE 2022 (*)
Provides for sustainability requirements, to be complied with by insurance companies, open complementary pension fund entities (EAPCs), savings bonds companies, and local reinsurers.
The SUPERINTENDENT OF THE SUPERINTENDENCY OF PRIVATE INSURANCE - SUSEP, in the use of the attributions conferred upon him by art. 36, subitem "b", of Decree-Law 73, of 21 November 1966, art. 3, sole paragraph, of Complementary Law 126, of 15 January 2007, art. 3, § 2, of Decree-Law 261 of 28 February 1967, as amended by Complementary Law 137 of 26 August 2010, and art. 74 of Complementary Law 109 of 29 May 2001 and considering what is in Susep File 15414.609369/2021-21, resolves:
CHAPTER I
OBJECT AND SCOPE
Art. 1. To provide for sustainability requirements to be complied with by insurance companies, open complementary pension fund companies (EAPCs), savings bonds companies, and local reinsurers.
CHAPTER II
DEFINITIONS
Art. 2. For the effects of this Circular, the following are considered:
I - supervised companies: insurance companies, EAPCs, savings bonds companies, and local reinsurers;
II - climatic risks, in its aspects:
a) physical climatic risks: possibility of the occurrence of losses caused by events associated with frequent and severe inclement weather or long-term environmental changes, which can be related to changes in weather patterns;
b) transition climate risks: possibility of losses caused by events associated with the process of transition to a low carbon economy, in which the emission of greenhouse gases is reduced or offset and the natural mechanisms for capturing these gases are preserved; and
c) litigation climate risks: possibility of losses caused by claims in liability insurance or direct actions against the supervised company, both due to failures in the management of physical or transition climate risks;
III - environmental risks: possibility of losses caused by events associated with environmental degradation, including the excessive use of natural resources;
IV - social risks: possibility of occurrence of losses caused by events associated to the violation of fundamental rights and guarantees or to acts that are harmful to the common interest;
V - common interest: interest associated with a group of people legally or factually linked by the same cause or circumstance, when not related to the definition of environmental risk, transition climate risk, physical climate risk or litigation climate risk;
VI - sustainability risks: set of climatic, environmental, and social risks;
VII - collaborators: administrators, employees, outsourced service providers and other relevant partners of the supervised company;
VIII - stakeholders: employees, clients, suppliers, local community, governmental bodies and any other people or institutions directly or indirectly impacted by the products, services or activities of the supervised company;
IX - administration bodies: the Board of Directors and the Executive Board; and
X - maximum administration body: the Board of Directors or, if it does not exist, the Executive Board.
Sole paragraph. Sustainability risks include events that affect the supervised company itself or its stakeholders and that have, based on criteria established by the supervised company, the potential to impact its operations, affect the demand for its products or services or result in unfavorable variations in the value of its assets or liabilities.
CHAPTER III
SUSTAINABILITY RISK MANAGEMENT
Art. 3. The management of sustainability risks must be compatible with the size of the supervised company, the nature and complexity of its operations and the materiality of the sustainability risks to which it is exposed.
§ 1. The supervised company must prepare a materiality study in order to identify, evaluate and classify, by materiality levels, the sustainability risks to which it is exposed, taking into consideration the characteristics of its activities, operations, products, services, clients, suppliers and service providers.
§ 2. The implementation of the provisions of this Chapter can be:
I - waived for activities or operations whose sustainability risks are considered immaterial, as long as this waiver is expressly provided for in the study mentioned in § 1; or
II - proportional to the level of materiality of the sustainability risks in the other cases.
§ 3. The materiality study, referred to in § 1, should be:
I - reassessed at least every three years, or whenever there is a significant change in the risk profile of the supervised company;
II - approved by the director responsible for internal controls, in the event it contains the exemptions foreseen in § 2, item I;
III - disclosed to the external public in a place of easy identification on the website of the supervised company, the group or conglomerate to which it belongs, in the event that the sustainability risks are considered immaterial for the totality of its activities and operations; and
IV - unique for the supervised companies served by the same unified ICS/ERM, and its preparation is the responsibility of the indicated supervised company in the form of the regulation in effect.
§ 4. For the purposes of the provisions of this Circular, the classification of sustainability risks by levels of materiality must be based on the value resulting from the combination of its estimated probability and impact, and a risk must be considered immaterial only if this value is below the minimum parameter of relevance defined by the supervised company.
Art. 4. The sustainability risk management will be inserted in the general context of the Internal Control System (ICS) and the Enterprise Risk Management (ERM), as provided in the regulation that defines them, and the supervised company must complement them by:
I - adopting methodologies, processes, procedures and specific controls to identify, evaluate, classify, measure, treat, monitor and report, in a timely manner, the sustainability risks to which it is exposed;
II - establishing limits for risk concentration and/or restrictions for doing business that consider the exposure of economic sectors, geographic regions, products or services to sustainability risks; and
III - in the case of supervised companies included in segments S1 or S2:
a) incorporating, in its quantitative risk measurement methodologies, projections, including long term ones, that consider events associated to sustainability risks;
b) recording relevant information for the management of sustainability risks, including data related to losses incurred by the supervised company, with the respective detailing of amounts, nature of the event, geographic region and economic sector subject of the exposure, discriminated, at least, in relation to the different types of sustainability risks defined in art. 2, items II to IV; and
c) using, whenever possible, the information mentioned in subitem "b" to improve the methodologies mentioned in subitem "a".
§ 1. The supervised companies included in segments S1 or S2 must, when establishing the limits and restrictions dealt with in item II of the head of this article, consider the results of the methodologies mentioned in item III, subitem "a".
§ 2. For the purposes of the provisions in item III, subitem "b", of the head of this article, the constitution of an exclusive database is not required, as long as the bases used allow the extraction of information at the required level of detail.
§ 3. The sustainability risks do not necessarily constitute new risk categories in the context of the regulation mentioned in the head of this article, and should, whenever possible, be considered in the mandatory categories of underwriting, credit, market, operational and liquidity risks, in view of their effects.
Art. 5. The supervised company must implement criteria and procedures for pricing and underwriting risks, with or without the imposition of special conditions, which take into account, at least:
I - the client's track record and commitment to sustainability risk management;
II - the client's capacity and willingness to mitigate the sustainability risks associated with the transaction; and
III - potential applicable restrictions or limits, pursuant to art. 4, item II.
Sole paragraph. The criteria and procedures referred to in the head of this article must:
I - be integrated to the underwriting risk management; and
II - be expressly stated in the underwriting policy and/or in the internal rules related to it.
Art. 6. The supervised company, except if it fits into segment S4, must implement criteria and procedures for the selection of investments that take into account, at least:
I - risks arising from:
a) exposures of the assets and/or their issuers to sustainability risks; and
b) failure to adopt good corporate governance practices by the issuers of the assets; and
II - potential applicable restrictions or limits, pursuant to art. 4, item II.
§ 1. The criteria and procedures referred to in the head of this article should:
I - be integrated to the management of market, credit and liquidity risks; and
II - be expressly mentioned in the investment policy and/or in the internal rules related to it, together with an indication of the portion of the investment portfolio to which they will be applied.
§ 2. The supervised company, when defining the portion of the investment portfolio mentioned in item II of § 1, must consider:
I - the availability of information about the risks mentioned in item I of the head of this article;
II - the offer of assets that meet the criteria mentioned in the head of this article; and
III - the risk-return targets established in its investment policy.
§ 3. The provisions in this article do not apply to specially constituted investment funds (FIEs).
Art. 7. The supervised company, except if it fits into segments S3 or S4, must implement criteria and procedures for the selection of suppliers and service providers that take into account their exposure to sustainability risks.
Sole paragraph. The criteria and procedures referred to in the head of this article must:
I - be integrated with operational risk management; and
II - be expressly stated in the risk management policy and/or in the internal rules related to it.
CHAPTER IV
THE SUSTAINABILITY POLICY
Section I
General Requirements
Art. 8. The supervised company must have a sustainability policy that establishes principles and guidelines aimed at ensuring that sustainability aspects, including risks and opportunities, are considered in the conduct of its business and in its relationship with stakeholders.
§ 1. For the purposes of the provisions of this article, sustainability aspects are considered:
I - the respect and protection of fundamental rights and guarantees, and of common interests;
II - the preservation of the environment and its repair, or, when possible, restoration;
III - the reduction of impacts caused by frequent and severe weather conditions or long-term environmental changes;
IV - the transition to a low carbon economy; and
V - the promotion of a more resilient and inclusive society.
§ 2. The sustainability policy may, at the discretion of the supervised company, define mechanisms to promote the stakeholders participation:
I - in the process of reassessing the sustainability policy; or
II - in the definition of the actions mentioned in art. 11 and in the evaluation of their results.
§ 3. The sustainability policy will not be considered, for the purposes of the regulation mentioned in the head of art. 4, as a complementary policy to the risk management policy.
Art. 9. The sustainability policy should be:
I - compatible with the size of the supervised company, the nature and complexity of its operations;
II - aligned to the strategic objectives of the supervised company and its business plan;
III - elaborated, at the supervised company's discretion, with the participation of its stakeholders;
IV - formally recorded in writing;
V - approved by the maximum administration body of the supervised company;
VI - disclosed:
a) to the employees of the supervised company, by means of clear, accessible language and in a level of detailing compatible with the functions they perform; and
b) to the external public, in a place of easy identification on the website of the supervised company, the group or conglomerate it belongs to, at least in a summarized version containing its general guidelines; and
VII - reevaluated at least every three years or whenever the supervised company deems necessary, especially for the maintenance of the alignment dealt with in item II of the head of this article.
Art. 10. The supervised company may adopt a sustainability policy defined in the scope of the group or conglomerate to which it belongs, provided that such policy complies with the provisions of this Circular and contemplates the specificities of the operations of the supervised company.
Sole Paragraph. In the event of an option for the alternative pursuant to this article, the provisions of article 9, item V are considered to have been met, if the maximum administration body of the supervised company registers such a detailed decision in the minutes of the meeting, attesting that the sustainability policy meets the requirements expressed in the head of this article.
Section II
Actions Related to the Sustainability Policy
Art. 11. In order to promote the effectiveness of the sustainability policy, the supervised company must implement, based on the principles and guidelines contained therein, actions related to, at least:
I - the development and offer of products or services; or
II - the performance of its activities and operations.
Sole Paragraph. In addition to the provisions in the head of this article, the supervised company may implement other actions related to the aspects mentioned in art. 8, § 1, which essentially aim at the promotion of positive impacts for the stakeholders and society in general, if so provided for in the sustainability policy.
Art. 12. The actions mentioned in art. 11 must be continuously monitored and evaluated, based on clear, objective and verifiable criteria, regarding their results and their contribution to the effectiveness of the sustainability policy.
Section III
Governance
Art. 13. The administration bodies of the supervised company are responsible for:
I - promoting the dissemination of the sustainability policy with its collaborators and other stakeholders;
II - ensuring:
a) the alignment referred to in art. 9, item II;
b) the compatibility and integration between the sustainability policy and the other policies of the supervised company, especially the risk management policy and its complementary policies; and
c) the adherence of the supervised company's business and operations, including the actions referred to in art. 11, to the sustainability policy; and
III - ensuring that the performance evaluation mechanisms and the remuneration structure adopted by the supervised company, both for its internal and external collaborators, do not encourage behaviors incompatible with the sustainability policy.
Sole Paragraph. In order to obtain assistance for the adequate performance of the duties defined in this article, the bodies mentioned in the head of this article may, at their discretion, constitute executive committees or commissions, as well as use evaluations made by units or employees of the supervised company.
Art. 14. It is the exclusive responsibility of the directors of the supervised company:
I - to conduct, in line with the principles and guidelines of the sustainability policy, the activities under its responsibility, including the actions referred to in art. 11, promoting the correction of any deficiencies detected; and
II - to subsidize the maximum administration body in relation to the elaboration and reevaluation of the sustainability policy.
CHAPTER V
THE SUSTAINABILITY REPORT
Art. 15. The supervised company must elaborate and disclose, until 30 April of each fiscal year, a sustainability report, describing, at least
I - the actions referred to in art. 11, explaining, if any, the results obtained in the previous year and those expected for the current year; and
II - the most relevant aspects related to the management of the sustainability risks to which it is exposed, including, at least:
a) the monitoring carried out by the maximum administration body;
b) the manner in which the results of the monitoring referred to in subitem "a" are considered in the review of the strategic objectives, the business plan and the sustainability policy;
c) the main collaborators, bodies and units involved in risk management, as well as their respective attributions and responsibilities;
d) the main risks identified and their possible impacts in the short, medium and long terms on the supervised company's business model, strategy and operations;
e) the processes used to identify, evaluate, classify, measure, treat, monitor and report risks; and
f) how risks are integrated into the ERM and the management of underwriting, credit, market, operational and liquidity risks.
§ 1. The provision in item II of the head of this article does not apply in the event the sustainability risks are considered immaterial for the totality of the activities and operations of the supervised company, according to the study of materiality pursuant to art. 3, § 1.
§ 2. The methodologies used to assess the information mentioned in the head of this article must be clearly set forth in the sustainability report.
§ 3. The sustainability report should be:
I - prepared with respect to the base date of 31 December of the fiscal year prior to its disclosure;
II - approved by the directors responsible for the actions referred to in art. 11 and, in the event that it contains the information foreseen in the item II of the head of this article, by the director responsible for internal controls; and
III - forwarded, for information, at least:
a) to the administration bodies;
b) to the Audit Committee;
c) to the Risk Committee, if any, in the event that it contains the information foreseen in item II of the head of this article; and
d) to the commissions and committees mentioned in art. 13, sole paragraph, if any.
§ 4. The persons and bodies mentioned in § 3, items II and III, must consider the contents of the sustainability report in the performance of their respective duties, especially with regard to the assessment of the effectiveness of the management of sustainability risks and the actions referred to in article 11.
§ 5. The sustainability report must be available to the external public, in an easily identifiable location on the website of the supervised company, the group or the conglomerate to which it belongs, for a minimum period of five years from the date of its publication.
§ 6. The sustainability report must be unique for the supervised companies served by the same unified ICS/ERM, and its preparation is the responsibility of the supervised company indicated in the form of the regulation in effect.
Art. 16. The competent General Coordination will disclose, through Susep's electronic site, standard tables for the summarized presentation of the information foreseen in art. 15, item II of the head of this article, which must:
I - be incorporated into the sustainability report in the form of attachments; and
II - present, in a segregated manner, at least the information related to climate risks.
Sole paragraph. The tables mentioned in the head of this article may also:
I - establish additional segregations of information, based on the different types of sustainability risks defined in art. 2, items II to IV; and
II - include additional information, of optional presentation, about:
a) opportunities related to the aspects mentioned in art. 8, § 1, and their impacts on the supervised company's business model, strategy and operations; and
b) metrics and targets used in sustainability risk management.
CHAPTER VI
TRANSITIONAL AND FINAL PROVISIONS
Art. 17. The supervised company must keep, under the terms of the regulations in effect, the current and previous versions of the following documents:
I - a materiality study, as per art. 3, § 1;
II - sustainability policy, as dealt with in Chapter IV;
III - sustainability report, as per Chapter V; and
IV - other documents that prove compliance with the provisions of this Circular.
Art. 18. The supervised companies will have the following deadlines for adequacy:
I - the provisions of Chapter IV:
a) until 31 December 2022, for the supervised companies in the S1 segment;
b) until 28 February 2023, for the supervised companies in the S2 segment;
c) until 30 April 2023, for the supervised companies classified in segments S3 or S4;
II - the provisions of Chapter III, with the exception of art. 4, item III, subitem "b":
a) until 31 December 2023, for the supervised companies in the S1 segment;
b) until 28 February 2024, for the supervised companies included in the S2 segment; and
c) until 30 April 2024, for the supervised companies classified in segments S3 or S4.
III - the provisions of art. 4, item III, subitem "b": until 30 June 2024; and
IV - the provisions of Chapter V:
a) until 30 June 2024, for those supervised companies classified in segment S1; and;
b) until 30 June 2025, for the supervised companies included in segments S2, S3 or S4.
Sole Paragraph. The dates set forth in item IV of the head of this article will correspond to the disclosure of the first sustainability report for the referred segments, relative to the base date of 31 December of the previous year.
Art. 19. This Circular comes into effect on 1 August 2022.
ALEXANDRE MILANESE CAMILLO
(Official Gazette “DOU” of 29.06.2022 - pages 92 and 93 - Section 1)
(*) The information provided in this publication is general and may not apply to a specific situation or person. Every effort has been made to ensure that matters of concern to readers are covered. Although the information provided is accurate, be advised that this is a developing area. The information contained herein is not intended to be relied upon or to be a substitute for legal advice in relation to particular circumstances. Specific legal advice should always be sought from experienced local advisers. Accordingly, Editora Roncarati accepts no liability for any loss that may arise from reliance upon this publication or the information it contains.
