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The Actuary The magazine of the Institute & Faculty of Actuaries

Climate change event focuses on opportunities for actuaries

The 13 September event at Staple Inn was well attended with over 60 interested participants from a variety of backgrounds who listened to four presentations from which two main themes emerged - the imminent energy crunch facing the UK, and the possible impacts of climate change on insurance, investment and pensions.

Ian Smyth and Tom Porter started with an analysis of the balancing act that energy policy will require in the next decade. They identified the investment need at £200bn over 10 years but new sources of energy will need to take into account future tightened emission limits as well as the increasing cost of inputs.

In the equation of decarbonisation versus security of supply versus affordability, the general feeling was that something would have to give. They also emphasised that actuaries have a key role in assisting clients and policymakers in the long-term planning and assessment of risks.

Oliver Bettis and Barry Maher then covered the risks and opportunities for general insurance actuaries. Mr Bettis admitted that he became interested in climate change through a mixture of intellectual interest and pure panic once he started to understand the implications of climate change on subsidence insurance.

As he presented a graph highlighting temperature increases in England over the last 235 years, a telling phrase accompanied the stark graphic - 'The past is no longer a good guide to the future'.

Despite the challenges, the presentation showed the role actuaries can play and are playing in the modelling of future impacts. The current modelling of risk needs an actuarial input and the REG's work in this area was highlighted with Mr Bettis having already presented at climate change events on the issue of 'Risk of Ruin'.

Nick Silver followed with a presentation on climate change adaptation and Green finance. Pension fund investment is an ideal match for green investment which requires relatively high upfront investment followed by a long payback period.

However, green investment is still relatively marginal as the market incentives are too heavily weighted towards other investments despite the likely better long term returns on low carbon investment. Mr Silver highlighted the approaches actuaries could take towards changing this.

Finally, Tessa Page presented on sustainable investment consulting. Although a relatively new and sometimes complex area, this will be increasingly relevant for trustees and management boards, not least because of corporate governance reasons. Ms Page highlighted current trends.

Following the presentations, there was a lively and wide-ranging debate. Questions and interventions often focused around how this issue could move more into the mainstream with a general impression that the end of cheap energy has not all been anticipated in the UK - neither by policymakers nor professionals.