An Actuarial Perspective
In 2015, the Society of Actuaries (SOA) established the Climate and Environmental Sustainability Research Committee (CESRC). The purpose of the CESRC is to expand the boundaries of the actuarial profession in this emerging area of practice. It will provide actuaries, policymakers and others with information that is of utility and interest for managing and mitigating risk associated with climate, weather and environmental changes.
The CESRC has identified and initiated research in areas where actuaries can provide value. Additionally, we are providing research and educational information to actuaries, as we believe that actuaries should consider climate and environmental sustainability in their quantification of risks.
As chair of the CESRC, I agree there is overwhelming evidence that climate change is occurring. This can be seen by the Actuaries Climate Index. As actuaries, I believe we have a responsibility to act.
Even if you are a climate change skeptic, there is a clear relationship between climate and morbidity and mortality. The article by Dr. Mona Sarfaty references personal observations of physicians who have experienced the relationship between climate and morbidity. We also observed it ourselves this summer with the hurricanes in the Caribbean and the United States. Empirical studies from innumerable sources further support this relationship.
Additionally, climate events clearly affect mortality. We can point to the deaths as a result of the hurricanes mentioned. As additional examples, we can look at the hundreds of deaths associated with the 1995 Chicago heat wave and the more than 70,000 deaths in the 2003 heat wave in Europe.1
These examples are obvious cases of climate affecting morbidity and mortality; and of course, there is a clear link between climate and general insurance losses. Climate change would have many other subtle effects that are not so obvious. This means climate and climate change have risk implications for health, life and general insurance actuaries. I believe all actuaries should consider the risks associated with climate change in setting reserves, premiums or otherwise quantifying risk.
Furthermore, once these risks have been identified, we must attempt to mitigate them. For example, the deaths that occurred in Chicago and Europe have not been repeated in subsequent heat waves because lessons were learned and mitigation techniques implemented. In an ideal world, we would identify the risks before there are catastrophic results and implement mitigation techniques to prevent losses, including a review of energy use with a view to mitigate greenhouse gas emissions.
Actuaries are perfectly suited to identify and quantify the risks associated with climate change and environmental (un)sustainability, and to assist with implementing mitigation techniques.