Climate change leads insurers to expand role
Amid the challenges posed by climate change, which is forcing revisions to pricing models and putting pressure on claims ratios, Brazil’s insurance sector has been moving to play a role in prevention and risk management. As part of these initiatives, the São Paulo Insurance Companies Union (Sindseg SP) and the city government of São Paulo announced a partnership aimed at strengthening the city’s preparedness for the effects of extreme weather events.
The project is based on a study of the city’s climate risks, mapping the exposure of different regions and their potential impacts. “Because of the nature of our work analyzing risk, our market accumulates a great deal of information not only about where events have already occurred, but also about where they may occur in the future,” says Patricia Chacon, president of Sindseg SP. “The idea is for the study to serve as a decision-support system for the municipal administration, helping define priorities for prevention, adaptation, and response.”
The survey was conducted by Guy Carpenter, an international reinsurance broker and consulting firm that in 2024 developed a specific model to measure climate risks in Brazil. According to Pedro Farme, the company’s president in the country, the work extends the traditional use of catastrophe models, which are normally used by the insurance sector to estimate losses. “We sought to incorporate other dimensions of the impacts of climate events, going beyond physical damage and reconstruction costs,” he says.
In addition to property damage, the study mapped potential social impacts and effects on the functioning of the city. The analysis also considered the resilience of urban infrastructure under extreme scenarios, identifying alternative routes and critical points to avoid collapse situations similar to those seen during the floods that hit Porto Alegre in 2024, Farme says.
According to Chacon, the plan is to extend the study to other cities in São Paulo state and make the initiative a “beacon” for the rest of the country. “The market still faces a very large insurance protection gap, and public-private partnerships are one path to solving part of this problem.”
In recent years, climate-related disasters have ceased to be a secondary concern for the sector and have become a central challenge, especially after the floods in Rio Grande do Sul, considered the largest climate-related claim event in the country’s history.
Against this backdrop, insurers have also expanded their participation in international forums on the issue. At the end of this month, for example, executives from the leading domestic and international insurers operating in Brazil will take part in London Climate Action Week.
“Taking part in these discussions is essential because climate challenges require cooperation, innovation, and collective development of solutions. Insurance obviously has a relevant role in financial protection, but above all in risk prevention and in generating intelligence for climate adaptation,” says Eduard Folch, president of Allianz Brasil.
The strategy to take part in sustainability debates, led by the National Confederation of Insurers (CNseg), began in 2023 with participation in COP 28 in Dubai and continued through COP 30 in Belém. “With the support of very important stakeholders, we were able to make insurance be seen as a fundamental instrument for adaptation, mitigation, prevention, and financing of the climate transition—so much so that the sector was highlighted in the letter from the president of COP 30, Ambassador André Corrêa do Lago, to the international community,” says Dyogo Oliveira, president of CNseg.