Determining the Impact of Climate Change on Insurance Risk and the Global Community-Phase II Request for Proposals
As actuaries are skilled in studying and evaluating the uncertainty of future events and their financial consequences, the American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society and the Society of Actuaries are partnering on a research project to develop an index to help raise awareness of the potential risks associated with climate change and the risk management implications within Canada and the United States, as well as globally. The index would highlight important indicators of climate change such as:
- Surface Temperature
- Sea Level
- Arctic Sea Ice
- Land-Based Glaciers
- Wild Fires
These organizations have established a Climate Index Working Group led by the Climate Change Committee of the Casualty Actuarial Society and are seeking a researcher to help the Committee in developing the index. Phase I of the research project has been completed by Solterra Solutions.
The purpose of this project is to educate actuaries, governments, businesses, educators and the public on climate change and its related risks. The Actuaries Climate Index will be aimed at the general public to paint a compelling picture of climate phenomena. The Actuaries Climate Index will be informative and educational, enhancing the image of the Actuary and serving the public. The Actuaries Climate Risk Index will be a resource for actuaries and others in developing predictive models for potential climate change related losses or opportunities as well as for risk management strategies. Actuaries might utilize the data and measures of the indicators and index in evaluating the potential risks of climate related changes to their employers. For example, a high index for wild fires, floods, droughts or hurricanes would indicate the potential for increased property damage, personal injury or death. In addition, the data and index might be useful to the American Academy of Actuaries and others in public policy discussions.
- RESEARCH OBJECTIVE
This is a two-phase study with the overall objective of developing an index of the key climate change indicators and a process for updating the index on a periodic basis. The Climate Change Committee is seeking a researcher for Phase II of the study. Phase I of the project has been completed. It’s goals were as follows:
- Review the work that had been completed to date by the Index Working Group in relation to the indicators listed above and develop a list of key indicators to be included in the index which will be finalized in collaboration with the Index Working Group
- Perform a literature review of the existing studies on the key climate indicators to identify established climate change indices and methodologies as well as data sources to be used in the development of the index.
- Summarize the findings of the literature review in a report that will address at a minimum the following items:
- What indices or measures exist for each indicator and how might they be adapted for this project?
- What are the historical trends of each indicator and what are the scientific views of future trends/changes?
- How might changes in these indicators impact future mortality, morbidity, property and casualty losses, and insurance risks?
- What data sources are available for each indicator?
- Utilizing the results in 1 and 2 and the research performed by the Index Working Group, develop a strategy for producing the index which will be finalized in collaboration with the Index Working Group.
In Phase II of the project, the researcher(s) will
- Review the work that has been completed to date by the Index Working Group in relation to the indicators discussed in the Phase 1 Report.
- Develop a common methodology to create climate change indices for each indicator. Research and present your views on each indicator, including data sources, with the aim of reaching consensus with the Index Working Group on what data should go into the indicator, and how the Index for that indicator is defined.
- The index should be easy to understand, but not simplistic. It should be compelling and educational, and it should serve the general public.
- Develop a methodology to combine the indices into one index. Produce the climate change indices and the Actuaries Climate Index (ACI) from the end of the reference period(s) to the current time. Ideally, we would like to see a quarterly index. Each indicator, with the exception of the Arctic Sea Ice, should have regional-level indicators for major regions in the globe.
- Develop an estimate of the cost of calculating the Actuaries Climate Index on an annual basis and communicating the results (includes four quarterly index results).
- Develop the Actuaries Climate Risk Index by combining the climate phenomena in the ACI with linkages to hazards and exposures. Hazards will include a measurement of the risk that the changing climate brings and it will be combined with an appropriate exposure base. The exposure base will be obtained from publicly-available data, and may include parameters such as population, housing stock, planted acreage, etc. For example, research indicates that at two-thirds of measurement stations along the continental shores of the United States, Sea Level Rise has led to a doubling in the annual risk of what once were considered "once-in-a-century" or worse floods. (Phase I report, page 5).
- Produce the Actuaries Climate Index and the Actuaries Climate Risk Index (ACRI) from the end of the reference period(s) to the current time. Ideally, we would like to see a quarterly index. The Actuaries Climate Index will include major regions of the globe, as well as having a global total. The Actuaries Climate Risk Index will be regional, including major regions in the U.S.A. and major population centers in Canada.
- Develop an estimate of the cost of calculating the ACRI on an annual basis and communicating the results to the members of the Actuarial Organizations. (includes four quarterly index results).
As noted above the researcher(s) will work closely with the Index Working Group to meet study objectives. The Index Working Group will provide management, oversight, and direction for the project. The Index Working Group will be very involved in relating climate phenomena to hazards in developing the ACRI.
The American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries intend to copyright and publish the results of this research. The research will be considered work-for-hire and all rights thereto belong to the American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries. However, appropriate credit will be given to the researcher(s).
To facilitate the evaluation of the proposal, the following information should be submitted:
- Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education, and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
- An outline of the approach to be used, emphasizing issues that require special consideration. Details should be given regarding the manner in which appropriate data sources will be identified, search techniques to be used, collateral material to be consulted, and possible limitations of the data and indices.
- Cost estimates for the research. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
- A schedule for completion of the research, identifying key dates or time frames for research completion and report submission.
- Ideas regarding the form and distribution of the ACI and ACRI, both for immediate release and for permanent reference (e.g., submission of an article describing the development of the Index to North American Actuarial Journal or other refereed publication).
- Other related factors that give evidence of a proposer’s capabilities to perform in a superior fashion should be detailed.
- SELECTION PROCESS
The CAS Climate Change Committee (CCC) is responsible for the selection of the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the CCC will make the final decision. The CAS’ Research Manager and the SOA’s Research Actuary will provide staff support. The Index Working Group has been formed by the CCC to oversee the project upon selection of the proposal.
Any questions regarding this RFP should be directed by e-mail to: Karen Sonnet, CAS Research Coordinator, at firstname.lastname@example.org.
- NOTIFICATION OF INTENT TO SUBMIT PROPOSAL
If your organization intends to submit a proposal, please send written notification via email by January 31, 2012 to Karen Sonnet, CAS Research Coordinator, at email@example.com
- SUBMISSION OF PROPOSAL
Please e-mail a copy of the proposal to: Karen Sonnet at firstname.lastname@example.org
Proposals must be received no later than February 22, 2013. It is anticipated that organizations submitting proposals will be informed of the status of their proposal no later than March 15th, 2013.
Note: Proposals are considered confidential and proprietary.
The American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries reserve the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available to proceed. The American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries also reserve the right to redirect the project as is deemed advisable. The American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries intend to copyright and publish the results of this research. The research will be considered work-for-hire and all rights thereto belong to the American Academy of Actuaries, the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Society of Actuaries.