CIA (e)Bulletin/(e)Bulletin de l'ICA
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June 2016
 
 

Actuaries Climate Index Closes in on Launch

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By Les Dandridge

Turn on your TV, open a newspaper or insurance trade magazine, follow federal, provincial, and territorial legislatures, and you will find that there is a lot of attention focused on climate change. Canada is a signatory to the Paris Agreement, one of 195 countries to make such a commitment. And actuaries are involved in the issue, from an investment, enterprise risk management (ERM), pension, and property and casualty, life, and health insurance perspective.

The Actuaries Climate Index (ACI), a groundbreaking web-based resource to which actuaries can refer in their work, will launch online this summer. A joint venture of the American Academy of Actuaries, the Casualty Actuarial Society (CAS), the Society of Actuaries (SOA), and the CIA, the ACI is not only of interest to actuaries, but to the broad public as well—politicians, teachers, students, the media, researchers, and business decision-makers will find important information on the site.

The ACI concentrates on six key climate indicators, measuring the frequency and intensity of their extremes, based on long-term observational data from weather stations in Canada and the United States. The six components are

  1. Frequency of temperatures above the 90th percentile;
  2. Frequency of temperatures below the 10th percentile;
  3. Maximum rainfall per month in five consecutive days;
  4. Annual maximum consecutive dry days;
  5. Frequency of wind speed above the 90th percentile; and
  6. Sea level changes.

The ACI looks at Canada and the United States as a whole, and is broken down into 12 subregions. ACI site visitors will be able to look at monthly observations based on measurements from an extensive network of meteorological stations and coastal tide stations, with data going back to December 1960, and see how the individual index components have measured since then. They will even be able to download the data to run their own analysis. This is a great educational feature for students, teachers, and actuaries.

 

The ACI will combine these components into a single index, based on quarterly/seasonal downloads of data, and the Climate Index Working Group, chaired by CIA member Caterina Lindman, will provide clear, concise, plain language explanations of what has been measured in the last quarter and what differences have been noted from the previous quarter.

The website will be deep and comprehensive with exhaustive details about the measurements, analysis, science and math, and the techniques that have gone into building the charts and graphs, for those interested in diving deeper. For the CIA, the Climate Change and Sustainability Committee (CCSC) has worked closely with the partners and the website designer on final implementation. CCSC Chair Karen Lockridge has worked with the partners on the project management aspect of the effort and helped to keep it moving forward.

ACI Origins 

The ACI had its start in 2008, with a suggestion to the SOA’s Image of the Actuary Group. From there, a group of interested actuaries from Canada and the U.S. started work on a thought-provoking experiment: Can actuaries and their unique toolkit and climate scientists, with their skill set, work together to come up with valuable research and tools? The work of Canadian actuary John Neal and climate scientist Dr. Katharine Hayhoe said, "Yes, absolutely," and their analysis laid a directional foundation that the associations used in developing the ACI.

Around the same time, the CAS launched a Climate Change Committee, currently chaired by U.S. actuary Douglas Collins, which gave the work a formal structure and a home for the Climate Index Working Group. The Climate Change Committee has a mandate to recommend, support, and perform research on climate change and assess the potential risk management implications for the insurance industry.

The four organizations commissioned Solterra Solutions, a Victoria-based climate change consulting firm, to first create a literature survey of climate science focused on the potential components of an index, which led to a report, Determining the Impact of Climate Change on Insurance Risk and the Global Community—Phase 1: Key Climate Indicators. This document focused on extreme weather, climate science, global climate change indicators, regional and seasonal climate change, the construction of climate indices, and future climate projections. The soon-to-be-released ACI has its roots firmly in this document.

The ACI will launch jointly by the four actuarial associations with press releases and news stories, and we expect that members will be proud of the results. CIA Fellows Caterina Lindman and Yves Guérard will be leading the team of spokespeople who will be responding to Canadian media enquiries. Stay tuned . . . we will keep you apprised of the launch day!

Les Dandridge is director of communications and public affairs at the CIA.

 

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