Fresh Support for CIA-Backed Study

Former CIA President Yves Guérard (pictured) is continuing his efforts to focus international attention on the contribution actuaries can bring to the management of environment risks, looking at the work of Canadian volunteers, among others, who are developing a climate change index for actuaries.

M. Guérard’s article "Resources and Environment: A new challenge for actuaries" has been published in Actuaries, the magazine of the Institute of Actuaries of Australia. It highlights the report Determining the Impact of Climate Change on Insurance Risk and the Global Community, which was commissioned by the CIA, Casualty Actuarial Society, Society of Actuaries, and American Academy of Actuaries, as well as a second report, Resource constraints: sharing a finite world - Implications of Limits to Growth for the Actuarial Profession, commissioned by the UK actuarial profession.

In his article, which considers a range of resources and environment issues that actuaries must address, the former Secretary-General of the International Actuarial Association writes:

"Our role as actuaries is to help optimise decisions. We don’t seek to prove or disprove the estimates made by the experts but we need to understand what they are saying . . .

"The last three chapters [of the first above-mentioned report] are dedicated to the development of climate indices and hence to Impacts and Risk assessment. The report proposes a definition of risk that ‘may be estimated quantitatively as the product of separate functions of hazard, exposure of assets and vulnerability’ . . .

"Insurance companies could use this approach to derive adjustments to their risk assessment process reflecting a consolidated expected impact of climate change. As the conclusions point out ‘this would represent a significant advance over existing approaches, which cover only a limited array of climate hazards, and are not standardised to reflect the key role of climate variability.’"

M. Guérard, who earlier this year wrote about the CIA-backed report in another magazine, urged his fellow actuaries to take heed of the study’s conclusion: "While only a rough framework has been sketched here, it seems clear that further investigation in any of these areas would reap significant rewards in terms of estimating the threat of hazards arising from climate change on life, property, and natural capital.

"I’d like to respond to that implicit appeal by suggesting two areas for further investigations:

The article, which incorporates figures and other research, is available on the IAAus website here.

Canadian Institute of Actuaries/Institut canadien des actuaires