17 Jun 2024
Climate Day 5.0
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 5.0, we are going to zoom into the following topics:
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 will be used for this online training). Please also make sure to join the web session with a stable internet connection.
Purpose and Nature
While the actuarial community develops new ways to measure the economic impact of the risk posed by climate change, it is exceedingly important for actuaries to gain an understanding of how to use climate data, how to bridge the gap between climate models and actuarial projection models and how to produce relevant KPIs.
To begin with, we discuss historical climate data and its relevance for actuarial calculations. We explore how machine learning techniques can be used to enhance historical climate data and to remove bias from modelled climate results. We proceed by showing how Extreme Value Theory can help us measure the tail dependency between heat and mortality.
We then move on to 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.
We continue by exploring how ESG risks can be reflected in the strategy of an insurance company to comply with the demands imposed by regulators and society. Being sustainable is an essential challenge which requires everyone’s commitment to make decisions that help safeguard the success of a business. The insurance sector must continue its path towards a sustainable business model, which requires understanding the rules of the game, knowing the regulatory impact and being mindful of various aspects from financial education to greenwashing practices.
Finally, we consider the risks of climate change in the context of the latter’s impact upon low-income people. We look into opportunities for insurers to improve risk management while making profits, and key components of profitability for insurers. We reflect upon COP28 and look beyond it, discussing how insurers can build their market of the future and how “risk management” supersedes insurance alone, while also taking technology considerations into account.
Abdal Chaudhry is Senior Director of Group Actuarial Reporting at Athora, with over 15 years of experience in the life insurance industry. 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.
Dr Michael Leitschkis is Group Chief Actuary at Athora with over 20 years of experience working in the life insurance industry. He is a member of the German Actuarial Association’s working party on Climate Scenarios. Michael has authored numerous publications and spoken at various EAA seminars and web sessions on 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 centres on actuarial modelling and forecasting using advanced econometric and statistical techniques.
Michael J McCord is one of the world’s leading experts in developing and managing microinsurance products. His decades of experience include working as controller of a U.S. commercial bank, chief executive officer of a microfinance institution in Uganda, and regional director for microfinance programs in Africa with FINCA International. In 2000, Michael founded the Microinsurance Centre, now MIC@M, part of Milliman. The MIC@M’s vision is to provide three billion low-income people across the world with access to valuable microinsurance and risk management solutions. Michael is a founding member of the Microinsurance Network, and a member of the steering committee for the Munich Re Foundation / Microinsurance Network annual conference on inclusive insurance.
Isabel Sanchez specializes in Banking and Strategic Consulting with extensive experience in Financial and Insurance. Currently, she serves as Business Continuity and Crisis Manager at Volkswagen Bank, with responsibility for Operational Risk and ESG risks. Isabel has contributed to undergraduate and postgraduate programs at different universities and business schools, notably as Director of MBA program at Universidad Carlemany, and has spoken at various international conferences on ESG risks.