How are climate-related risks and opportunities affecting your or- ganization’s businesses, strategy and financial planning? Increasingly, companies are asking themselves that
question to prepare for an uncertain future.
Indeed, the impact of climate risk is a
topic that regulators are considering as
well. The Financial Stability Board set
up the Task Force on Climate-related Fi-
nancial Disclosures “to help identify the
information needed by investors, lenders
and insurance underwriters to appropri-
ately assess and price climate-related risks
These voluntary disclosures would give
stakeholders a clearer picture of how com-
panies perceive and are addressing climate
risks. And the National Association of In-
surance Commissioners’ Insurer Climate
Risk Disclosure Survey, adopted in 2010,
is now mandatory for larger insurers.
The Actuaries Climate Index (ACI), a
monitoring tool launched in November
2016 by four North American actuarial
organizations, may be helpful to insurance companies in answering these types
of questions and in managing climate-related risks and opportunities.
Why are actuaries weighing in on
Actuaries are experienced in the assessment and mitigation of the financial consequences of risks and in the summarization and presentation of complex data
for decision-making. A changing climate
is having a financial impact on insurance
Risk for Insurers
ACTUARIES TRACK THE IMPACT
OF WEATHER TRENDS
By Douglas J. Collins
consumers and providers, and actuaries
are well positioned to conduct deep analysis to map out what has been happening in
recent decades. The Actuaries Climate Index was developed by the Climate Change
Committee, a joint effort of the American
Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial
Society, and the Society of Actuaries.
What is the Actuaries Climate
The ACI is an educational tool designed to
help inform actuaries, public policymakers
and the general public about climate trends
and their potential impact. A quarterly
measure of changes in extreme weather
events and sea levels, the ACI is based on
analysis of quarterly seasonal data for six
different index components collected from
1961 through the latest available season,
compared to the 30-year reference period
of 1961 to 1990. The ACI is available online at ActuariesClimateIndex.org.
The ACI divides the continental United
States and Canada into 12 different regions.
Higher index values indicate an increase in
the occurrence of extreme weather events.
The risk measured by the ACI is relative to the average frequencies during the
reference period of 1961–1990. The data
is from neutral, scientific sources, generating objective, evidence-based results on
extreme weather events. According to the
data analysis, 1.02 is the current five-year
moving average value for the index. The
index value remained below 0.25 during
the reference period, reached a value of
0.5 in 1998, and first reached 1.0 in 2013.
These values indicate an increase in the
frequency of extreme weather occurrences and changes in sea levels to a sustained
level above any single season (out of 120)
during the reference period.
The ACI data is available for free on the
website, which shows graphs and maps of
the data by region and component. There
is a guided tour to the website and documentation explaining how the index was
developed and how it is calculated.
A second index, the Actuaries Climate
Risk Index (ACRI), is based on the historical correlations of economic losses, mortality, and injuries to the ACI data, and is
expected to be launched later this year.
Regions used in the ACI follow state and