30 Nov 2021
2nd Climate Day: Risks& Opport. for the Insur. Industry
The debate on climate change has rapidly evolved in recent years. It is no longer on whether the evidence of human impact on climate change is real, but on whether key mitigating strategies being adopted are sufficient. While actuaries are already developing models to quantify the impact of climate change on insurance businesses, it is becoming increasingly evident that the actuarial community’s understanding of climate risk is not yet as developed as its expertise on traditional insurance risks such as mortality risk.
We begin by showing how to apply well-known laws of physics and chemistry to build a practical climate model. We also connect our demo climate model to a few insurance applications e.g. in the micro-insurance area.
Then, we zoom into the insurance industry by examining various relevant national and European regulations – in particular, we discuss how insurers can take climate risks into consideration in their ORSA. Participants will be encouraged to share their views and approaches to this challenge.
That said, we should not see the climate change through compliance glasses. In fact, global warming also presents important opportunities. In particular, we are going to talk about investment opportunities it presents and take bonds, equities and alternative investments into consideration.
Having discussed a few examples how climate change will impact life insurance risks and market risks, we conclude our Climate Day by a lecture dedicated to non-life insurance risks. Our focus here will be on flood risk and how climate modelling can help capture the future evolution of flood risks in actuarial models.
Organised by the EAA - European Actuarial Academy GmbH.
The web session is open to all interested persons.
Technical requirementsPlease check with your IT department if your firewall and computer settings support web session participation (the programme Zoom is used for the web session). Please also make sure that you are joining the web session with a stable internet connection.
Purpose and Nature
While the actuarial community works on developing new ways to measure the economic impact of the risk posed by global warming, it is exceedingly important for Actuaries to gain an understanding of the underlying science of climate change. Having discussed the basics of climate science in a dedicated web session in Q4 2020, we are now going to move from climate science to climate models and then focus onto insurance-specific requirements and applications.
To begin with, we show how laws of physics and chemistry can help us build practical climate models dealing with glaciers, rising water level etc. We then discuss how a gap between climate models and actuarial models can be bridged e.g. in order to capture how climate change will impact mortality risk.
Next, we zoom into the insurance context by embarking on a journey through various relevant national and European regulatory requirements. In particular, we examine how insurance companies can take global warming into consideration in their ORSA.
Having discussed several requirements insurers need to comply with, we move on by considering climate change as a unique investment opportunity. After an overview of Net Zero financing needs and key transition drivers, we look into green finance and investment examples covering equity, bonds and alternative asset classes.
Finally, we look into the flood-related climate risk. We discuss several applications of flood and climate modeling as an input to financial models, along with best practices for integrating them with financial models. As an example, we present a case study on flood and climate risk to residential property and mortgage risk in the United States.
Abdal ChaudhryAbdal is a Consultant at Milliman with over 10 years of experience working in the life insurance industry in the United Kingdom. Abdal specializes in Solvency II reporting, risk calibrations, proxy modelling and capital management and has delivered a number of projects in these areas for large UK based life insurance companies. Prior to his role at Milliman, Abdal has worked on the applications of Machine Learning techniques for the optimization of the Solvency II Internal Model SCR calculations. As a member of Milliman Climate Risk R&D taskforce, Abdal focuses on the modelling of physical risks.
Sinéad Clarke Sinéad is a Principal with Milliman with almost 15 years of experience working in the life insurance industry in Ireland. Sinéad’s experience includes a wide range of actuarial work for both domestic and cross-border insurance companies in Ireland, with a focus on Solvency II (Pillar I, II and III), risk management, financial projections and capital management. She has recently been involved in helping a number of new insurance start-ups set up in Ireland. Sinéad is a frequent speaker at various Milliman and Society of Actuaries in Ireland events and has published various papers and briefing notes on Solvency II, Own Risk and Solvency Assessment (ORSA) and most recently climate-related risks.
Neil Dissanayake Neil is a Principal with Milliman, Director of European Trading for the global Financial Risk Management group, and has been with Milliman since 2006. He leads a trading team split across London and Amsterdam, supporting clients with European exposures that utilise Milliman’s global hedging platform. Our platform manages portfolios of derivative hedge assets on behalf of insurance companies and investment funds, to hedge equity, bond, currency and interest rate risks. He has authored a number of publications and spoken at various events on the topic of financial risk management, for both insurers and DC pension funds. Most recently on ESG and low-carbon exposures, and implications for financial risk management. He is a certified Green and Sustainable Finance Professional with the Chartered Banker Institute in the UK.
Dave EvansDave is a Consulting Actuary at Milliman, working in the United States. Dave is a Fellow of the Casualty Actuarial Society and has 11 years of property insurance experience, with a focus on catastrophic risk. Dave is a flood insurance expert and has helped insurers, reinsurers, agencies, and regulators as part of the emerging private flood market in the United States.
Leighton HunleyLeighton, MBA is a Senior Financial Consultant with Milliman in the United States. He joined the firm in 2002. Leighton’s areas of expertise include credit risk consulting, mortgage insurance, credit insurance, and mortgage market analytics. He has performed work and taken the lead on projects for mortgage insurers, reinsurers, top mortgage lenders including credit unions, and government agencies. Leighton also has experience working on projects involving climate change and flood event impacts on credit risk, student and auto loan lending, reserve evaluations, rate analyses, and financial modeling. Recently, he has managed the development of business intelligence reporting through data visualizations for clients.
Michael LeitschkisMichael is a Principal with Milliman with over 15 years of experience working in the life insurance industry, notably in Germany and the United Kingdom. Michael specializes in risk modelling, e.g. for Solvency II Internal Models. In this context, he contributes to R&D work as to how to allow for climate change impacts in actuarial projection models. Michael has published a number of papers on several Solvency II aspects and is a frequent speaker at various EAA seminars and web sessions. In particular, he has been teaching risk modelling as part of the EAA’s CERA working party since 2011.
Amy Nicholson Amy is a Consultant with Milliman with almost 10 years of experience working in the insurance industry in the UK. Amy’s experience includes a range of actuarial work covering cross-border insurance transactions, rationalisation and restructuring programmes, risk management, recovery and resolution planning and other consultancy work. More recently Amy has supported a number of life insurers in the UK with their climate change programmes, including regulatory compliance preparations, scenario analysis and integration of climate risk into risk managagement frameworks. Amy has also authored a number of publications on the topic of climate risk, including ESG considerations for the life insurance industry, climate change and the Prudent Person Principle, and various summaries of regulatory and industry climate change guidance.
Sponsor of the Web Session