CNseg Propostal - SOCIAL INSURANCE FOR NATURAL DISASTERS - 2024

SOCIALINSURANCE FORNATURALDISASTERS

CNseg’sProposal (SubstituteforBill1,410)

SUSTAINABILITYANDCONSUMERRELATIONSDEPARTMENT

March2024

Tacklingclimatechangeisacrucialissueforall countries.Brazilisbecomingincreasingly vulnerabletonaturaldisasters,largelyduetoits hugesizeanditssocial,environmentaland economicdifferences.

Therefore,jointeffortsbythepublicauthorities, civilsocietyandprivatesectorareessentialto buildpoliciesaimedatefficientriskmanagement andthedevelopmentofadaptationstrategiesto strengthentheresilienceofBraziliancitiesinthe faceofclimatechange.

OBJECTIVE

Provideprotectionandfinancialsupportto Brazilianswhoexperiencenaturaldisasters causedbyheavyrainandflooding,strengthening theriskmitigationagendainlightoftheclimate emergency,whilefosteringanadaptationagenda andhelpingcitiesandmunicipalitiestobuildtheir resilienceagainsttheclimatechange.

Theaimistocreatea socialinsuranceschemefor naturaldisastersinvolving floodingandlandslides causedbyheavyrain.

Thisinsuranceschemewillcover materialdamagesintheformof emergencycompensationand funeralexpensesforvictimsof naturaldisastersrelatedtoheavy rainfall,providedthatthepublic authoritiesdeclareanaturaldisaster.

Thepolicywillcover residentialproperties locatedinurbanand/orrural areasofthemunicipalitiesin questionandtheirresidents.

PAYOUTS,TRANSPARENCY ANDFREEDOMOFCHOICE

Thisinsurancepolicywillbeofa privatenatureandwillbetakenoutin exchangeformonthlypremiums, freelysetbyinsurers,whichmayvary accordingtotheregionofthe country(North,Northeast,Midwest, SouthandSoutheast).

Customerswillbeableto choosebetweeninsurers thatoperateintheirregion.

Powerdistributorswillhave toenterintocooperation agreementswithinsurers ortheirtradeassociations.

Giventheneedforabroadand supportivebase,aimingforlowand affordableinsurancepremiumsfor thepopulation(aroundR$3.00per month),weproposetochargeiton electricitybills.

Customerswhodonotpay theirpremiumswillbe subjecttoafine,without prejudicetootherpenalties.

PAYOUTS

Intheeventofdamagetoaresidential property,theinsuranceclaimwillbepaid directlytothecustomerbytheinsurerupon presentationbythemunicipalgovernmentof thelistofpropertiesdamagedbythedisaster andcoveredbytheinsurancescheme.

Intheeventofthedeathofacustomerdue toanaturaldisaster,theclaimwillbedue regardlessofwhetherthedeathoccurred insideoroutsidetheirhome,anditwillbe paidtothedeceasedperson’sbeneficiaries.

PAYOUTS

Payoutswillnotbeduetoresidentswhoat anytimerefusetovacatetheirpropertyafter theauthoritieshavereportedanimminent risk(worseningofrisk).Thisinformationmust beprovidedbythecivildefenseorganization andmunicipalgovernmenttocustomers.

Thepayoutwillbefixedinaccordancewith theregulationsoftheNationalPrivate InsuranceCouncil(CNSP).Withmonthly premiumsofaroundR$3.00, itisestimatedthateachcustomeraffected byanaturaldisasterwillreceiveapayoutof aroundR$15,000.

BRAZILIANDATATHATPOINTSTOTHEURGENT

NEEDTOAPPROVEASOCIALINSURANCE

SCHEMEFORNATURALDISASTERS

INTHELAST10YEARS,

DataanalyzedandpublishedbytheNationalConfederationofMunicipalities(CNM) %

OFBRAZILIAN MUNICIPALITIES

havebeenaffectedbya naturaldisasterthathas ledtothedeclarationofan emergencyorstateof publiccalamity,especially duetostormsorfloods.

BRAZILIANDATATHATPOINTSTOTHEURGENT NEEDTOAPPROVEASOCIALINSURANCE SCHEMEFORNATURALDISASTERS

BETWEEN2013AND2022:

morethan2.2millionhomeswere damagedinBrazilbecauseof theseevents,causinglossesof morethanR$26billion.

Municipalitiesinthe

Northeastexperiencedthe biggestlosses:R$16billion.

4.2millionpeoplehadtoleave theirhomesin2,640 municipalitiesacrossBrazil.

theperiodfrom2020to2022 accountedfor70%offinancial losses(aroundR$18.3billion).

DataanalyzedandpublishedbytheNationalConfederationofMunicipalities(CNM)

MunicipalitiesintheSouth hadthehighestpercentage ofaffectedhouses. Inall,1millionhomes weredamagedand54,559 weredestroyed(notincluding thedamageincurredin August2023).

GLOBALDATATHATPOINTSTOTHEURGENT NEEDTOAPPROVEASOCIALINSURANCE SCHEMEFORNATURALDISASTERS

Recordriseinglobal temperaturesoverthe nextfiveyearsduetothe effectsofgreenhouse gasesandElNiño

66%probabilitythatforat leastoneyear,theaverage annualglobaltemperature between2023and2027will bemorethan1.5°Cabove pre-industriallevels

98%probabilitythatat leastoneofthenextfive years,andthefive-year periodasawhole,willbe thehottestonrecord

Data:WorldMeteorologicalOrganization