Infrastructure works and the role of insurance
The development of infrastructure plays an essential role in the economic and social growth of any country. In Brazil, these ventures are usually characterized by high investments, long duration, and significant risks, which makes it essential to adopt mechanisms that ensure their viability and continuity. In this context, insurance emerges as a strategic tool to mitigate uncertainties, protect invested capital, and provide legal and financial security to all parties involved.
1. Structure and organization of the national and international insurance and reinsurance market
The international insurance market plays a strategic role in global economic stability, offering protection against financial, property, and social risks in an increasingly volatile environment. In 2025, the sector generated approximately €2.32 trillion in global premiums in the Property & Casualty (P&C)1 insurance segment. This volume reflects not only the growing demand for protection against climate, cyber, and geopolitical risks, but also the resilience and relevance of the sector as a foundation for sustainable development and economic security for states, companies, and individuals around the world.
In this context, Brazil ranks among the world’s largest P&C insurance markets, with total premium income of approximately €24 billion in 2025, representing growth of 7.1% during the year. Despite this growth, P&C insurance penetration in Brazil stood at approximately 1.2% of Gross Domestic Product in 2025, indicating significant room for expanding insurance protection in the country.
To better understand Brazil’s position in this market and the factors that influence its performance, it is essential to analyze the structure of the National Private Insurance System (SNSP), identifying the main players in the Private Insurance Policy (PSP).
The insurance market in Brazil is regulated by the National Council of Private Insurance (CNSP), which is linked to the Ministry of Finance. The CNSP, formed by representatives of the federal public administration, performs regulatory functions by defining the guidelines and rules governing private insurance policy in Brazil. Among its duties, as set forth in art. 32 of Decree-Law No. 73/1966, are the establishment of general policies for the insurance and reinsurance sectors, as well as the regulation of the creation, organization, operation, and supervision of the agents operating in this market.
The Superintendence of Private Insurance (SUSEP) is a federal agency linked to the Ministry of Finance, which, in accordance with art. 36 of Decree-Law No. 73/1966, has as its main functions the implementation of the policy established by the CNSP, the regulation of the insurance market through the issuance of regulatory acts, and the supervision of insurers, reinsurers, and insurance operations.
In this context, companies authorized to operate in private insurance, i.e., insurers, occupy a central position in the market and are generally incorporated as joint stock companies (art. 72 of Decree-Law No. 73/1966, in conjunction with art. 25 of Law No. 4,595/1964). Among other activities, they are responsible for marketing insurance products.
In summary, under art. 1 of Law No. 15,040/2024, known as the Insurance Contract Act (ICA)2, through the insurance contract (policy), insurers undertake to guarantee the legitimate interest of the insured or beneficiary against predetermined risks, in exchange for payment of the premium.
The entry into force of Law No. 15,040/2024 established a specific and systematic legal framework for insurance contracts, covering, among other matters, their formation, interpretation, and performance, as well as claim adjustment and settlement. In infrastructure projects, which involve complex contracts and the participation of multiple parties, the new legislation reinforces the importance of properly aligning the insurance terms, the risk matrix, and the other contractual instruments of the project.
Insurers are subject to prior authorization to operate, as provided for in art. 74 of Decree-Law No. 73/19663 and art. 2 of Law No. 15,040/20244. Such authorization is granted based on the criteria set forth in Decree No. 60,459/1967 and the rules of the CNSP and SUSEP. The requirements considered include minimum capital, proper incorporation, and an organizational structure capable of adopting accounting procedures consistent with the applicable rules, thereby ensuring operational transparency.
Also within the SNSP, reinsurers play an important role in spreading the large risks assumed by insurers. In summary, through reinsurance, insurers transfer some or all of the risks assumed vis-à-vis policyholders to a reinsurer. Risks may also be distributed through retrocession, whereby reinsurance risks are transferred between reinsurers or, where legally permitted, to local insurers.
Reinsurance and retrocession activities are also regulated by SUSEP, as recommended by CNSP Resolution No. 168/2007, which establishes the requirements for the establishment and operation of reinsurance companies.
Reinsurance and retrocession activities are also governed by Supplementary Law No. 126/2007 and the regulations issued by the CNSP and SUSEP, which establish, among other matters, the categories of reinsurers authorized to operate and the requirements applicable to reinsurance and retrocession operations.
Finally, the SNSP also includes licensed brokers, who intermediate the placement of insurance and assist policyholders, in exchange for remuneration usually known as a brokerage commission.
The exercise of this activity requires insurance brokers to obtain prior technical qualification and registration, pursuant to art. 2 of Law No. 4,594/19645 and the applicable regulations. Accordingly, a licensed insurance broker is qualified to assist in identifying risks and coverage needs, advise policyholders on the insurance they intend to purchase, and provide assistance throughout the performance and term of the contract.
Due to its highly regulated structure and robust supervisory and oversight mechanisms, the Brazilian insurance market offers the legal and financial security essential to the viability of large projects. This institutional solidity contributes directly to strengthening strategic sectors of the economy, such as infrastructure, which depends on predictability and risk coverage capacity to attract capital, meet schedules, and ensure the continuity of projects. Thus, the synergy between the insurance market and the infrastructure sector becomes a key element in promoting sustainable development, private investment, and the modernization of national infrastructure.
1 Data from Allianz Research, Allianz Global Insurance Report 2026: The Future of Insurance in a Fragmenting World, published on 05/28/2026.
2 Law No. 15,040/2024, art. 1: Under the insurance contract, the insurer undertakes, upon payment of the equivalent premium, to guarantee the legitimate interest of the insured or beneficiary against predetermined risks.
3 Decree-Law No. 73/1966, art. 74: Authorization to operate shall be granted upon an application signed by a legal representative of the interested parties and submitted to SUSEP, in accordance with the administrative procedure and requirements established by the CNSP.
4 Law No. 15,040/2024, art. 2: Only entities duly authorized by law may enter into insurance contracts.
5 Law No. 4,594/1964, art. 2: The exercise of the insurance broker profession requires prior technical qualification and registration with a self-regulatory entity of the brokerage market or with the Superintendence of Private Insurance (SUSEP), under the terms defined by the National Council of Private Insurance (CNSP).
2. Infrastructure – Public and private procurement
Infrastructure works can be carried out by both public and private entities, each following their own legal regimes and procedures, which directly influence the structuring of contracts, risk management, and insurance requirements.
Public Procurements
In the public sector, procurement is mainly governed by Law No. 14,133/2021 (Public Procurement and Administrative Contracts Law), which replaced previous rules by modernizing and providing greater certainty to procurement procedures. This law establishes rules for contracting works, services, and concessions, seeking to ensure the best proposal for the Public Administration, with clearer evaluation criteria and risk mitigation instruments.
In the public sector, procurement is mainly governed by Law No. 14,133/2021 (Public Procurement and Administrative Contracts Law), which replaced the previous general legislation by modernizing and providing greater certainty to procurement procedures. This law establishes rules for the procurement of works, services, and concessions, seeking to secure the best proposal for the Public Administration, with clearer evaluation criteria and risk-mitigation instruments.
In addition, specific laws apply to other procurement regimes, such as common concessions (Law No. 8,987/1995) and sponsored and administrative concessions (Public-Private Partnerships, or PPPs) (Law No. 11,079/2004).
In these contracts, it is common to require financial and contractual guarantees to ensure the execution of the works, the proper provision of services, and the repair of damages, should they occur. The available guarantees include surety insurance, bank guarantees, and cash deposits. Surety insurance has gained prominence because it may offer competitive costs and, compared with guarantees requiring the immobilization of funds, have a smaller impact on companies’ cash flow.
As a rule, the performance guarantee may correspond to up to 5% of the initial contract value, with an increase to up to 10% permitted where justified by the technical complexity and the risks involved. In procurements for high-value works and engineering services, surety insurance with a step-in clause may be required in an amount equivalent to up to 30% of the initial contract value.
Where such a clause is adopted, the insurer may monitor contract performance, access technical and accounting information and, upon the contractor’s default, take over and complete the contracted scope, directly or through a third party, subject to the terms of the tender notice, the contract, and the policy.
Private Procurements
In the private sector, infrastructure works are contracted with greater flexibility, based on the parties’ freedom of contract, but not completely freely. Infrastructure projects, such as large real estate developments, industrial plants, logistics or energy complexes, are subject to, among other things, specific technical standards, environmental agency requirements, and conditions imposed by financial institutions participating in the financing.
In many cases, financiers and investors make the release of funds conditional on the purchase of insurance intended to protect the invested capital, mitigate the effects of potential stoppages, and ensure the restoration of assets in the event of a covered loss or, depending on the type of insurance purchased, a default on the guaranteed obligations.
In addition, large private projects often involve EPC (Engineering, Procurement and Construction) contracts, in which the contractor assumes full responsibility for engineering, equipment procurement, and construction. Thus, in these contracts, risk allocation and the selection of insurance policies help promote the continuity of the works and mitigate losses to the interested parties.
In this context, insurance is no longer merely a contractual requirement and becomes part of the business strategy itself, serving as a fundamental instrument for strengthening project credibility, protecting cash flow, and attracting investors and partners. The careful selection of the policies best suited to each type and phase of the works, and the proper combination of the coverages purchased, are therefore decisive in promoting the security and viability of infrastructure projects and protecting the parties involved against material losses, third-party liabilities, and contractual risks, thereby strengthening the project’s financial sustainability, a topic discussed below through an overview of the principal types of insurance used in the sector.
3. Main types of insurance used in infrastructure projects
Policies are instruments that formalize insurance contracts, which, as noted above, are essential for mitigating risks in infrastructure projects and are usually required by both public bodies and private investors and financiers.
Among the various policies used to mitigate risks in infrastructure projects, two broad categories stand out for purposes of this article: damage and liability insurance, and surety insurance. These types of insurance play a central role in protecting infrastructure works, providing support from the execution phase through liability for potential failures.
3.1. Damage and liability insurance
In infrastructure projects, damage and liability insurance are fundamental pillars for the financial and legal protection of the parties involved, in both public and private works. They are purchased to mitigate direct material losses, cover liabilities arising from accidents and failures under the respective policies, and contribute to the project’s financial continuity in the face of unforeseen events, among other purposes.
These policies may provide coverage during the physical execution of the works, ranging from damage caused by external factors, such as adverse weather, to events attributable to human or technical failures, provided that they fall within the covered risks. They may also cover civil-liability risks, particularly damage caused to third parties, which may include neighboring residents, passers-by, or even the environment.
With regard to civil liability insurance, it is also possible to take out coverage for legal expenses and defense fees arising from any formal claim made by an injured third party.
Among the main lines and coverages of interest to infrastructure projects are the following:
Engineering risk insurance: Engineering risk insurance aims to provide indemnification for losses arising from covered events occurring during construction, installation, or the assembly of machinery and equipment. It is intended to protect the insured’s legitimate interest against risks resulting in damage or loss to the works described in the policy and the materials used, as well as to installed machinery, equipment, and metal structures.
In other words, this insurance may cover material damage to the works themselves during execution, assembly, and testing. Typical coverage may include losses caused by natural phenomena, such as floods, strong winds, and lightning, as well as errors in execution, previously unidentified design defects, fires, explosions, and accidents at the construction site.
It is usually required by financiers and regulatory bodies, as it may enable damaged property to be replaced or repaired and thereby mitigate the effects of the event on the project schedule or economic viability.
This insurance line is currently governed by SUSEP Circular No. 620/2020, without prejudice to the general rules applicable to damage insurance and Law No. 15,040/2024.
General liability insurance: General liability insurance is intended to protect the interest of an insured that is held liable for damage caused to third parties and required to compensate them by a court judgment, arbitral award or, where provided for in the contract, administrative decision, or through a settlement with the injured third parties, subject to the insurer’s consent and the terms of the contract.
In summary, within the context of infrastructure works, this insurance is intended to guarantee, within the contracted limits and terms, the indemnities for which the insured is held civilly liable due to damage caused to third parties directly related to construction activities. Common situations include materials falling on neighboring properties and accidents involving passers-by, among others.
Purchasing this policy can therefore contribute to preserving the company’s image, mitigating the effects of costly litigation, and complying with contractual requirements, especially in construction projects located in urban areas or areas presenting greater social and environmental risk.
This insurance line is currently governed, in particular, by SUSEP Circular No. 637/2021, without prejudice to Law No. 15,040/2024, which contains specific provisions on liability insurance.
Professional liability insurance: Professional liability insurance is intended to protect the insured against ‘risks arising from civil liability related to the provision of professional services that constitute the insured’s business activity.’
In a construction context, this insurance is intended for engineers, designers, architects, and other technical professionals, as well as, depending on the structure purchased, the legal entities responsible for providing such services. It protects them against claims for errors or omissions that cause losses to third parties. This coverage is particularly relevant in projects of high technical complexity, in which calculation or specification errors may result in significant losses.
This insurance line is currently governed by SUSEP Circular No. 637/2021.
Environmental liability insurance: Environmental liability insurance is intended to cover ‘risks arising from civil liability related to environmental damage.’
Thus, this insurance may provide coverage for civil liability arising from environmental damage accidentally caused during the execution of the works, whether due to leaks, improper waste disposal, soil or water contamination, or uncontrolled atmospheric emissions, subject to the risks, exclusions, and limits set forth in the policy.
In addition to meeting any contractual requirements or conditions established by environmental and regulatory authorities, the policy may include coverage for remediation costs, third-party damage, and certain defense costs or civil consequences related to the environmental event. Its purchase is advisable for projects with high pollution potential, such as road, port, industrial, and energy projects.
This insurance line is also currently provided for in SUSEP Circular No. 637/2021.
Domestic and international cargo insurance: Cargo insurance is intended to protect the insured’s interest against risks affecting materials, parts, supplies, and equipment transported to construction sites, both within Brazil and internationally, by land, air, and water.
Coverage may include theft, damage during transit, accidents involving the carrying vehicles, and loading and unloading operations, among other logistical risks. It is particularly relevant in projects involving high-value equipment or imported supplies.
In projects where the transport of critical equipment is on the schedule’s critical path, the purchase of coverage for certain financial losses arising from delay caused by covered damage during transit should also be considered.
This insurance is currently governed by SUSEP Circular No. 354/2007, without prejudice to the general rules applicable to damage insurance and Law No. 15,040/2024.
3.2. Surety insurance: main types and scope of coverage
Surety insurance, currently governed by SUSEP Circular No. 662/2022, is intended to guarantee the principal contract against the risk of default by the principal on the obligations guaranteed by the policy. As an ancillary contract linked to the principal contract, the policy must be compatible with the characteristics, obligations, and legislation applicable to the guaranteed relationship. If it does not cover all obligations under the principal contract, it must clearly and objectively identify those that are effectively guaranteed.
It is an essential instrument in infrastructure projects, as it may replace traditional guarantees such as bank guarantees or cash deposits, reducing costs, accelerating approvals, and preserving companies’ credit limits within the financial system.
The main types of surety insurance applicable to infrastructure contracts are detailed below:
Bid Bond: This type of insurance is intended to guarantee certain obligations assumed by the bidder, particularly that the winning bidder will maintain the terms of its bid and enter into the contract if awarded.
Therefore, once the insurance has been purchased, if the winning bidder refuses to sign the contract or fails to provide the additional guarantees specified in the tender notice, the insurer may be required to indemnify the insured, within the terms and limits of the policy, for losses arising from default on the guaranteed obligation.
Performance Bond: This type of insurance is purchased in connection with the execution of the principal contract to guarantee performance of the execution obligations expressly covered by the policy, as established by the contract and its documents.
In the event of default by the contractor, such as abandonment of the works or failure to meet deadlines or specifications covered by the guaranteed obligation, the insurer must indemnify the insured in the manner provided for in the policy, subject to the characterization of the loss and the guarantee amount. Depending on the policy wording and the applicable legal framework, indemnification may be made by a cash payment or by performance of the guaranteed obligation, including through a third-party contractor.
In public contracts that provide for a step-in clause, the insurer may, subject to the tender notice, the contract, and the policy, monitor performance and, once default is characterized, take over and complete the contracted scope, directly or through a third party, or pay the insured amount.
This type of insurance may also include additional coverage for contractual fines and/or labor and social-security obligations related to the principal contract, provided that they are expressly covered by the policy and subject to the applicable limits and terms.
Advance Payment Guarantee: This type of surety insurance protects the contracting party where funds are advanced to the contractor, but the corresponding consideration is not provided in the form of works, services, or acquisition of materials, as agreed and covered by the policy.
In this scenario, once it has been demonstrated that the advance payment was effectively granted to the contractor and that the consideration covered by the advance was not amortized as agreed, the insurer must indemnify the contracting party for covered losses arising from the unamortized amounts, subject to characterization of the loss, the guarantee amount, and the other terms of the policy.
Retention Money Guarantee: Commonly used in infrastructure contracts as a form of financial protection, this type of insurance is intended to replace the retention that the contracting party might otherwise apply to payment installments owed to the contractor, allowing the full amount of the installment to be released upon presentation of the relevant guarantee.
Under this type of insurance, the contractor receives the full amount of the payment installment owed by the contracting party, and the insurer is responsible for indemnifying the contracting party for losses that would otherwise have been absorbed by the retention, as contractually provided.
4. Conclusion
Insurance is more than a risk-transfer tool: it is a genuine instrument for enabling and structuring infrastructure projects. Its presence throughout all stages of the project, from the bidding phase through operation, reinforces the reliability of contracts, protects the assets involved, and strengthens the relationship among contracting parties, contractors, financiers, investors, and operators.
The effectiveness of this protection, however, depends on compatibility among the project’s technical characteristics, its risk matrix, the contracts entered into, and the policy terms, so that the purchase of insurance forms part of project management from the design stage onward.
Given the technical and legal complexity of infrastructure projects, the appropriate combination of damage insurance, liability insurance, and contractual guarantees constitutes a strategic advantage. By mitigating uncertainties, reducing the effects of litigation, and contributing to the continuity of the works even in the face of unforeseen events, insurance plays a central role in building a safer, more attractive, and more resilient business environment, which is essential to the country’s growth.
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Authors: Débora Schalch, Gabriel Ramos Casali, Juliana Zukauskas e Tatiana Algodoal
Schalch Sociedade de Advogados – SSA
Avenida Faria Lima, 4509, Itaim Bibi
Postal Code: 04538-133 – São Paulo, State of São Paulo.
Phone: (11) 3889-8996
E-mail: [email protected]
Internet: www.ssaadv.com.br