13 Jun 2022
Climate Day 3.0: Actuaries & Climate Scientists Join Forces
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.
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. However, we have no good excuse to continue operating actuarial projection models over horizons of 40 years and beyond, without any allowance for climate change impacts. Yet how can we bridge the gap between complex climate models and complex actuarial models?
In our Climate Day, we address this challenge by leveraging actuarial know-how as well as that from climate science and data science in order to discuss the following questions:
• Which climate data challenges are we facing and how can we overcome them?• How are atmospheric circulation, surface weather and climate extremes linked?• Why does Net Zero represent a unique investment opportunity?• How can we measure alignment of an asset portfolio with Net Zero?
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 how to work with climate data, how to bridge the gap between climate models and actuarial projection models and how to produce relevant KPI.
To begin with, we take a deep dive into climate data. Taking our recent work on mortality and health risks as an example, we discuss processing of past climate data identifying relevant climate variables and statistical analysis tools. We consider different approaches available to calibrate mortality risk on historical data and discuss how climate model results can be used to estimate the impact of climate change on mortality. We also explore how machine learning techniques can be used to enhance historical data and to remove bias from the modelled climate results.
Having looked into climate data from the perspective of actuaries and data scientists, we take a look at extreme weather events through the eyes of climate scientists. More precisely, the aim is to explore how atmospheric circulation – mainly in terms of weather patterns, jet stream states, and teleconnections – is linked with surface weather and climate extremes, focusing on the mid-latitudes and Europe. We discuss changes in atmospheric circulation both due to natural variability and forced responses, such as anthropogenic climate change, and the current state of research in the field, using examples from recent high-impact extremes, such as the 2018 summer European heatwave and the 2021 July floods in central Europe.
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.
Having highlighted the Net Zero investment opportunity, we discuss how the current alignment of an institutional investment portfolio to Net Zero can be estimated. In particular, we consider how an insurance company can “take the temperature” of their asset portfolio. Of course, a portfolio warming assessment is a complex process requiring data improvements and a lot of expert judgement, e.g. in order to translate carbon budgets into benchmarks. However, we believe that the portfolio warming is a useful KPI and its estimation can help insurers better understand and manage climate risks inherent to their asset portfolios.
Abdal Chaudhry Abdal is a senior consultant at Barnett Waddingham with over 12 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 several projects in these areas for large UK based life insurance companies. In his current role, Abdal is researching into the impact of climate change on life insurance risks and applications of machine learning techniques to enhance historical climate data and improve future predictions. Prior to his role at Barnett Waddingham, Abdal has worked on the applications of machine learning techniques for the optimization of the Solvency II Internal Model SCR calculations.
Dr Giorgia Di Capua Giorgia is a post-doctoral researcher in the field of atmospheric and climate physics. She obtained her PhD title from the Free University of Amsterdam in 2021 with a thesis on “Interactions between the Indian monsoon and the mid-latitude circulation”. She is affiliated with the Potsdam Institute for Climate Impact Research since 2015 and she currently works as a postdoc at the Magdeburg-Stendal University of Applied Sciences. Her research focuses mainly on causal discovery tools applied to climate and atmospheric variability. Giorgia has authored several publications on atmospheric dynamics and climate sciences.
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.
Dr Michael LeitschkisMichael is a Principal with Milliman with almost 20 years of experience working in the life insurance industry, notably in Germany and the United Kingdom. Michael specializes in risk modelling, e.g. in the context of Solvency II Internal Models, and actuarial systems transformation. In this context, he develops practical approaches allowing to reflect climate scenarios in actuarial projection models for life insurers. Michael has authored a number of publications and spoken at various EAA seminars and web sessions on risk modelling in general and climate modelling in particular. He has been teaching risk taxonomy and risk modelling as part of the EAA’s CERA working party since 2011.
Dr Efi RousiEfi is a senior researcher specialized in the field of atmospheric sciences, climate change, and climate extremes. She obtained her PhD in 2014 from the Aristotle University of Thessaloniki, Greece, and then moved to Germany in 2015, where she is working until today as a climate researcher, first at the Institute for Meteorology of the Free University of Berlin and then at the Potsdam Institute for Climate Impact research. She is particularly interested in the role of atmospheric circulation in shaping climate and weather extremes in a changing climate. Efi has authored numerous publications in peer-reviewed journals and conference proceedings on climate variability and climate change and has participated in many national and international research projects.