Analyzing Extreme Weather

R. Dale Hall

Several actuarial organizations, including the Society of Actuaries (SOA), released new updates for the Actuaries Climate Index. This index provides objective, quarterly measures of changes in extreme weather frequency and sea level. While the index officially launched in November 2016, we now have data updated through spring and summer 2016. In fact, the Actuaries Climate Index value for the United States and Canada for summer 2016 was 1.72, the third-highest seasonal level recorded.

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By way of background, the Actuaries Climate Index was developed by the Climate Change Committee, formed from a partnership among the American Academy of Actuaries (the Academy), the Canadian Institute of Actuaries (CIA), the Casualty Actuarial Society (CAS) and the SOA. The index is designed to provide actuaries, public policymakers and the general public with objective data about changes in the frequency of extreme climate events over recent decades.

I encourage you to visit the website and examine the data analysis available. You can look at specific regions within North America and a variety of time frames by adjusting the parameters. For example, you can investigate high and low temperatures, find out the data on extreme wind power, and dive deeper into heavy precipitation and drought. Aside from the separate regional data analysis, we provide an overall Actuaries Climate Index average using the six different index components with data from 1961 to summer 2016. The current five-year moving average of the index is 1.03, which continues a trend of exceeding observations from the 30-year reference period from 1961–1990.

The current highest five-year average values by region are in:

  • Northwest Pacific (British Columbia and Yukon Territory)
  • Northeast Atlantic (New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island)
  • Southern Plains (Kansas, Montana, North Dakota, Nebraska, Oklahoma, South Dakota, Texas and Wyoming)

High temperatures and rising sea levels primarily drive the high values in these regions. We will continue to provide quarterly updates, using data for each meteorological season when available.

The next phase of this project will build on the initial climate variable research and develop the Actuaries Climate Risk Index. This second index will measure correlations between changes in the frequency of extreme events as measured by the index and insurance variables, such as economic losses, mortality and injuries. Stay tuned for more updates from the sponsoring actuarial organizations.

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R. Dale Hall, FSA, CERA, MAAA, is managing director of Research at the Society of Actuaries.