A global body has called upon all parties concerned with the challenges of climate risks to actively involve actuaries in their discussions and deliberations. Actuaries are not only risk management experts in the traditional financial services sectors; they are also a readily accessible and knowledgeable resource of expertise for emerging issues such as climate risks.
The International Actuarial Association (IAA) – an actuarial profession globally recognised as leading experts in risk and financial security, contributing to the well-being of society – has been co-ordinating global work on how the actuarial profession is contributing to the assessment and mitigation of climate-related risk. In a statement, IAA says it recognises that actuaries can play an important role in inter-disciplinary assessment and discussion of adaptation measures and their impact on insurance and social security systems, protection gaps, vulnerabilities, affordability, insurability, and resilience.
“Actuaries can play an essential role in assessing risk and in developing mitigation and adaptation strategies in the global effort to reduce climate-related damage from extreme climate events that have become more common. For example, a climate issue that was once classified as a once in 100-year event may, in certain circumstances, become a one in 10-year event. Assessing the effect of such changes and considering mechanisms to reduce risks is a natural extension of what actuaries are trained for,” stated IAA’s President Roseanne Harris.
Trained in the rigorous analysis of risks and developing ways to manage them, actuaries consider the complexities of multiple stakeholder interests and recognise a professional responsibility to protect the public interest. Increasingly, traditional protection through financial products and processes is accompanied by advice on behaviour changes to mitigate risks as they arise. This is highly relevant in the context of climate change where the actuarial contribution includes assessment of financial risks as well as scenarios that demonstrate the benefit from encouraging behaviour change.
The Actuarial Society of Kenya (TASK) has partnered with Financial Sector Deepening Africa (FSD Africa) to set up Environment, Social, Governance Taskforce (The ESG Taskforce) that will drive and support readiness of the financial sector in managing ESG risks and in supporting green finance. It will seek to create meaningful engagement by all actuaries, their clients, the financial industry, regulators, and wider stakeholders in understanding and addressing the uncertainties for economic and financial systems arising from Environment, Social, and Governance issues. The taskforce will also provide leadership and training on ESG issues with an aim to help identify, educate, and raise awareness of the need for such issues to be addressed.
COP 27 – UN Climate Change Conference – will take place from 6 to 18 November 2022 in Sharm el-Sheikh, Egypt. Adaptation will be a key focus of this year’s COP 27. It is important that actuaries collectively reflect on ways to adapt to emerging impacts of climate change by realigning their priorities to ensure reasonable life conditions for future generations, says IAA.
In line with this year’s COP27 objectives, adaptation will be the theme for the sixth IAA paper in the Climate Risk Series: The Climate Change Adaptation Gap – An Actuarial Perspective which has been released as an exposure draft for consultation. The paper emphasises that “coordinated adaptation measures are urgently needed as a defence against future climate-related risks and damages and to build resilience to them. More extensive risk data and information, enlightened policies, and insurance products that can motivate and enhance preventive and recovery actions will help to reduce losses and damages.”
To date, five IAA papers in the Climate Risk Seriesa, and a joint paper with the IPCCb, have been produced. The IAA is expected to release two additional papers in 2023 as it continues to explore areas such as the sustainable transition to a net zero global economy, the use of scenarios in various practice areas, and how actuaries can add value to these important discussions.
To learn more about the work of the IAA on this topic, contact the Director of Technical Activities at the IAA Secretariat.
- IAA Climate Risk Series Papers:
- Importance of Climate-Related Risks for Actuaries
- Introduction to Climate-Related Scenarios
- Climate-Related Scenarios Applied to Insurers and Other Financial Institutions
- Application of Climate-Related Risk Scenarios to Asset Portfolios
- Climate-Related Disclosures and Risk Management: Standards and Leading Practices
- Joint IAA/IPCC WGI Paper: Climate Science: A Summary for Actuaries – What the IPCC Climate Change Report 2021 Means for the Actuarial Profession
The ESG Taskforce shall showcase its activities during the 7th TASK Actuarial Convention 2022 that shall take place at Safari Park Hotel on 10-11 November, 2022. To register: https://www.actuarieskenya.or.ke/7tac22-registration-form/#