19 Jun 2023
Climate Day 4.0
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.
For insurance industry, climate change manifests itself through a variety of risks on the asset and liability sides of the balance sheet. In our Climate Day 4.0, we are going to zoom into the following topics:
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 discuss processing of past climate data and identification of relevant climate variables. We explore how machine learning techniques can be used to enhance historical data and to remove bias from the modelled climate results. We proceed by showing how Extreme Value Theory can help us measure the tail dependency between heat and mortality.
We continue by exploring the global risk landscape, interdependencies and path dependence of current financing and policy decisions around climate and sustainability more widely. We discuss climate and transition scenarios and how to navigate these for ORSA purposes.
Next, we analyse the impact of climate change on health insurance, using a model calculation. For this purpose, the global warming impact upon health insurance claims in Germany will be simulated under different climate scenarios. Together with key macroeconomic figures based on transition paths of climate scenarios, we will model the impact upon the main KPI of a private health insurance company in Germany and discuss which mitigating measures it can consider.
We conclude the Climate Day on the asset side of the balance sheet, where 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 is Senior Director of Group Actuarial Reporting at Athora, with over 15 years of experience in the life insurance industry, notably in the United Kingdom. In the recent years, Abdal has conducted research into the use of machine learning techniques to enhance climate data, improve future climate model projections and to estimate the impact of climate change on insurance risks.
Loudina Erasmus is Principal Actuary at Athora Netherlands, Board member and international liaison for the Royal Dutch Actuarial Association on the topics of Sustainability and Climate. She holds a Master degree in sustainable development.
Alexander Krauskopf is Director at Deloitte with nearly 25 years of experience in the health insurance industry in Germany. Previously, Alexander worked for 20 years at Generali Health in Germany with focus on actuarial modelling, valuation and reporting under Solvency II and IFRS17. In his current role as consultant for health insurance companies, he focuses on all actuarial topics related to the risk management and pricing. Alexander is member of the ERM committee of the German Actuary Association (DAV). He currently leads a working group on the derivation of climate change scenarios, and he authored a paper about the impact of climate change on health.
Dr Michael Leitschkis is Group Chief Actuary at Athora with 20 years of experience working in the life insurance industry, notably in Germany and the United Kingdom. He is a member of the German Actuarial Association’s working party on Climate Scenarios. 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 Han Li is an Associate Professor at the Centre for Actuarial Studies, Department of Economics. She is also an Associate Investigator at the ARC Centre of Excellence in Population Ageing Research. She is an Associate of the Institute of Actuaries of Australia, and has a broad range of research interests around longevity and mortality risks, ageing and retirement, and the impact of climate change on insurance industry. Specifically, much of her research expertise centers on actuarial modelling and forecasting using advanced econometric and statistical techniques. She has attracted research funds from the Australian Research Council, the Society of Actuaries, the Casualty Actuarial Society, and the Australia-Germany Joint Research Cooperation Scheme (DAAD). Han's research has been published in top-tier journals including Insurance: Mathematics and Economics, ASTIN Bulletin, North American Actuarial Journal, Scandinavian Actuarial Journal, Journal of Forecasting, and Annals of Actuarial Science.