Tools to Tackle Climate Challenges

The SOA’s Catastrophe & Climate Strategic Research Program offers timely resources Priya Rohatgi November 2021

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The Catastrophe & Climate Strategic Research Program, the fifth Strategic Initiative of the Society of Actuaries (SOA) Research Institute, launched in October 2021. With climate catastrophes and extreme weather events happening at a dizzying pace, and financial and economic losses outpacing worst-case estimates, this feels very timely.

To gain a multidisciplinary perspective, a group of experts across geographies and disciplines came together in 2019 to form the Program Steering Committee. The focus of the Committee has been on developing pertinent research and conducting ongoing literature review to create a repository of up-to-date resources that make the evolving body of knowledge on climate science, models, socioeconomic scenarios and the like more accessible to practicing actuaries. In addition, the Committee strives to identify areas of climate research that may benefit from traditional actuarial methods.

The SOA inaugural Climate Risk Symposium—held remotely on Nov. 2, 2021, under the banner “The Evolving Role of the Actuary in Climate Risk”—is another initiative of the SOA Research Institute to not only present viewpoints of actuaries who are at the vanguard working on these emerging risks, but also facilitate a dialogue among SOA members and stakeholders. In case you missed it, the team will be posting highlights from the symposium on the research program webpage.

With climate risk becoming a core business issue and a key agenda item for many boards of directors and top management, actuaries increasingly are asked to provide input to strategic decision-making. This often requires them to perform climate-related scenario analysis, model various aspects of carbon emissions or offsets, evaluate/prepare climate-related financial disclosures, update catastrophe models and assess green investments—which all require new skills, tools and techniques. The SOA Research Institute strives to close the knowledge gap and equip our community with the appropriate tools to take on these new challenges.

Recently, the SOA Research Institute published three reports:

Potential Impacts of Climate Change on U.S. Inland Flood Risk by Mid Century by Peter Sousounis, Ph.D., Alastair Clarke, Ph.D., and Doug Fullam, ASA
This report examines how inland flood risk and loss may change across the United States in the future because of climate change. The AIR Worldwide (AIR) Inland Flood Model for the United States and the AIR Hurricane Model for the United States were used to evaluate the impact on insurable losses.
Potential Impacts of Climate Change on U.S. Wildfire Risk by Mid Century by Peter Sousounis, Ph.D., Alastair Clarke, Ph.D., and Doug Fullam, ASA
Using the AIR Wildfire Model, this study provides insight into how wildfire risk and loss may evolve unevenly in the Western United States due to pernicious amplification of risks.
Projected Changes in Insurability and Affordability of Insurance Coverages Due to Climate Change by Michael M. Hall, FCAS, MAAA, and David Heppen FCAS, MAAA
In this report, the researchers perform a meta-study to analyze the impact of climate risk on crops and U.S. agricultural productivity and the associated implications for crop insurance pricing, including the Federal Crop Insurance Program (FCIP).

The Committee publishes the monthly Actuarial Weather Extremes Series and a newsletter every quarter. This September, a “bonus” edition was published with opinion pieces on the Intergovernmental Panel on Climate Change Sixth Assessment Report (IPCC AR6 WG1—The Physical Science Basis).

The Environmental Risk Series is another ongoing key project. This is an educational series for practicing actuaries with 12 papers contributed by multiple authors on various climate-related topics. The most recent publication is Impact of Climate Change on Investors by Max J. Rudolph, FSA, CFA, CERA, MAAA.

We are constantly adding more resources and research papers to the Catastrophe & Climate research webpage, including external reports from organizations worldwide. Please bookmark it to stay up to date with the latest initiatives and get access to resources and supplementary materials.

Our goal is to enable the actuarial community to navigate the rapidly evolving landscape of risk evaluation, mitigation and adaptation strategies, and facilitate constructive engagement with other stakeholders. To help us serve you better, we need to hear from you. Please take surveys associated with our publications, or feel free to reach out to us at research@soa.org with any feedback or suggestions. We are in this together!

Priya Rohatgi, ASA, is a member of the SOA Catastrophe & Climate Strategic Research Program Steering Committee and a contributing editor for The Actuary.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.