Traits: Principled: Level 1 (T:PR:L1)

An analysis of the impact of climate change on financial institution solvency, profitability, and other key performance metrics is, or is likely to be, required by financial regulators in most major economies in the very near future. Regulators are signaling that such impacts should be assessed through the use of scenario analysis, both qualitatively and quantitatively. This session will first provide an overview of recent changes to the regulatory landscape for insurers as it relates to the disclosure of climate risk. The session will then explore the mechanics and current best practices that actuaries and risk modelers may use in performing qualitative and quantitative climate risk scenario analyses, covering both physical and transition risks. Finally, it will explore how insurers can use transition planning to coordinate a cohesive transition to a low-carbon economy.

Learning Objectives:

1. Develop an understanding of regulatory requirements for climate risk disclosure across the world.
2. Identify and develop awareness of industry standard climate ‘pathways’ to consider within climate risk scenario modeling.
3. Explore how transition planning can help insurers integrate climate into their firm’s business strategy.

Presenters:

• Adam Kallin, PwC
• Paige Fox, PwC
• Joshua Rosenheck, PwC

Over the past several years, climate-related trends have had a significant impact on insurance companies and consumers alike. As different climate patterns have emerged over the past several years, the evidence is compelling: the warmest six years on record have occurred since 2015; eight of the 10 largest wildfires in California history have occurred since 2017;The number of strong storms is increasing; and Hurricane Ian—with damages worth an estimated $113 billion—was the third costliest hurricane in U.S. history and just one of the 18 separate billion-dollar disasters in 2022. Exacerbating the risks brought about by climate-related trends is a recent demographic trend: migration within the U.S. More consumers are migrating to areas with higher weather-related risks. When one considers all the new dynamics in play, there is little doubt that climate change insurance risk is intensifying, and the insurance industry must understand these changes in order to adapt. This discussion will highlight the migratory and climate changes affecting the U.S. and quantify the impact to insurance carriers.

Learning Objectives:

1. Understand climate and migratory trends impacting the industry.
2. Understand what the potential long-term impact could be based on these trends.
3. Understand what the potential long-term impact could be based on these trends.

Presenters

• James Handley Jr., Director of Data Science, LexisNexis Risk Solutions
• Vincent Wei, Manager Data Science, Manager Data Science

Steve and Tatjana are members of the CAS Climate Change Task Force tasked with climate change research that is currently focused on climate risk analytics. This session will present the development of a prototype Climate Risk Index by modeling US Disaster costs using climate extreme components of the Actuaries Climate Index (ACI) and other tools. The session will show how predictive ACI climate-extreme component measures explain growth in catastrophic disaster losses due to climate risk. The work of the CAS Climate Change Task Force will also illustrate how to construct frequency and severity trend models from aggregate risk data.

The presentation will also include a look at other climate risk analytic solutions, based on a review of available literature, including FEMA's National Risk Index.

Learning Objectives:

1. Gain familiarity with the Actuaries Climate Index and a prototype Climate Risk Index.
2. Know where to find Aggregate Catastrophe Data and how to prepare it for modeling.

Presenters:

• Steve Kolk, ACAS, MAAA, President & Consulting Actuary, Kolkulations LLC
• Tatjana Miljkovic, PhD, MBA, Associate Professor and Actuarial Science Advisor, Miami University Department of Statistics

This presentation will discuss the North American Actuaries Climate Index – both the current version of the index, referred to as “ACI 1.1”, and an improved version, referred to as “ACI 2.0”, which is presently under development.

Alp, Steve, and Patrick are members of the working group tasked with the development of ACI 2.0. They will discuss the strengths and weaknesses of ACI 1.1, the motivations for developing version 2.0, and the ideas and concepts that are presently being examined and tested as part of the ACI 2.0 development process. The presentation will cover the following ACI 2.0 development considerations:

• Possible data sources: station data, gridded interpolated data, gridded reanalysis data;
• Data elements (weather and sea-level variables);
• Metrics for summarizing local-level weather (with emphasis on weather extremes);
• Options for aggregating local metrics across both space and time;
• Aggregation across elements;
• Options for displaying results.

Learning Objectives:

1. Understand main weather data types: station data (e.g. GHCN), gridded interpolated data (e.g. GHCNDEX), and gridded reanalysis data (e.g. ERA5).
2. Test weather time-series data for long-term trends.
3. Capture weather extremes in a manner that is statistically significant.

Presenters:

• Alp Can, USI Insurance Services
• Steve Jackson, American Academy of Actuaries
• Patrick Wiese, Society of Actuaries Research Institute

Climate change affects actuaries' work through modeling, risk identification, and regulation. This presentation will help participants recognize and respond to how that work may create professionalism obligations.

Learning Objective:

1. Be able to recognize touch points between professionalism and various Climate Risk topics that affect actuaries' work.

Presenters:

• Kris De Frain, NAIC - Howard Kunst, Core Logic
• Todd Hess, Swiss Re