Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • November 2015
11

Risk management approach essential in response to climate change risks

Open-access content Friday 27th November 2015 — updated 5.50pm, Wednesday 29th April 2020

In advance of the 21st Conference of Parties to the United Nations Framework Convention on Climate Change (COP21) next week, the IFoA is calling for governments and businesses to take a risk management approach to climate change as essential in addressing environmental risks.

2
In a report published yesterday, the Institute and Faculty of Actuaries (IFoA) said "Climate change is one of the biggest threats that society faces. The risks associated with climate change are wide-ranging and could have major economic, political, social and financial impacts. The IFoA is deeply concerned by these issues and supports efforts by governments at the UN Climate Change Conference (COP21) next week to address climate risks."

Nico Aspinall, chair of the IFoA's Resource and Environment Board commented: "The IFoA recognises the serious risk that climate change poses to society. The actuarial profession is committed to working with governments, business and other stakeholders to help better understand the long-term consequences of climate change, and help develop policy options to respond to these risks.

The cost of delay is also specifically addressed in the report. Aspinall highlighted that: "The effects of climate change are already being felt on a global scale. Without early action, climate change will continue to be disruptive in the first half of this century and has the potential to become catastrophic in the second half.

Based on the work of climate scientists and climate policy experts, and actuaries' expertise in managing risk and uncertainty, the report concluded that:

1   Climate change is a risk management problem - current climate policy is based on an understanding of what is expect to occur, when in fact future temperatures could be more extreme. If society is to understand and avoid a worst case scenario, the scale and impact of extreme scenarios should be a prominent element in climate policy.

2   The cost of delay is high and early action on emissions will improve future options - failure to take timely action on emissions is likely to lead to more costly and disruptive remedial action at a later date, as well as earlier and more severe climate impacts.

3  Continuous assessment and dynamic management should be central aspects of climate policy - there is considerable uncertainty about the precise nature and timing of climate change impacts and how they will affect the population. The Intergovernmental Panel on Climate Change's (IPCC) 2°C-consistent carbon budget is not guaranteed to achieve its goal; it only has a 2/3rds chance of limiting temperature rises to 2°C. Governments need to ensure that climate risk is continually assessed to reduce uncertainty and new information and insights are used to inform policy responses.  

4  Action is needed to address market failures - governments also need to recognise their role in correcting market failures, for example by pricing the negative effects of greenhouse gas emissions. Effective policies for pricing carbon, and for compulsory and standardised disclosure of climate risks, will allow markets to rationally and systematically respond to climate change.

5  Policymakers and financial institutions need to balance multiple timeframes - current approaches to policy and investment decisions tend to place a high value on the short-term, potentially at the expense of future generations. Both policymakers and financial institutions need to consider the time horizons on which they are basing decisions and how their decisions may affect people now and in the future.

"COP21 is a critical step towards mitigating the risk that climate change poses," said Aspinall. "However, governments and businesses need to move away from short-term thinking and make sure policy and investment decisions take account of future generations. Our report concludes that continuous assessment and dynamic management as part of a proper risk management approach to climate change should be adopted as central aspects of climate policy. This will help ensure risks are identified in good time to properly plan for any disruption and economic and social costs in the future."

A full copy of the report can be downloaded at: bit.ly/1MV5NwA

This article appeared in our November 2015 issue of The Actuary .
Click here to view this issue

You may also be interested in...

2

Insurers unprepared for possible effects of climate change on capital

Insurers could find their capital under strain from the unpredictable effects of climate change, market rating firm Standard & Poor’s has warned.
Thursday 19th November 2015
Open-access content
2

Legislation passed for Flood Re to take effect in April

The Flood Re reinsurance scheme is due to take effect in April after floods minister Rory Stewart signed its regulations, following parliamentary approval. 
Thursday 12th November 2015
Open-access content
2

Hazard maps help insurers better understand windstorm risk

The Met Office has launched a new set of maps to help analyse and price the risk incoming windstorms may have at a local level.
Tuesday 10th November 2015
Open-access content
2

Nearly five million at risk of flooding, Environment Agency warns

Almost five million people in England are at risk of flooding, but many have not taken steps to improve their flood awareness, according to the Environment Agency (EA).
Monday 9th November 2015
Open-access content
2

US homeowners insurance market likely to improve

Prospective returns for US homeowners insurers are set to continue to improve, Aon Benfield has said.
Thursday 5th November 2015
Open-access content
2

Mexico 'significantly underinsured', says Lloyd's

Mexico is not having enough insurance coverage against natural catastrophes, according to Lloyd's.
Tuesday 3rd November 2015
Open-access content

Latest from Environment

rdth

Make My Money Matter's Tony Burdon on the practical power of sustainable pensions

Years working in international development showed Tony Burdon, head of Make My Money Matter, that sustainable pensions can harness trillions of pounds to build a better world – at a scale governments and charities can’t. He talks to Travis Elsum
Wednesday 1st March 2023
Open-access content
ty

Data detective

Heard about the chatbot ChatGPT? Artificial intelligence is advancing rapidly, says Arjun Brara – and could soon be used to refine ESG ratings and expose greenwashing
Wednesday 1st March 2023
Open-access content
iugu

Interview: chemist and climate expert Sir David King on how actuaries can save the Arctic

Actuaries can save the Arctic, according to esteemed chemist and climate-change expert Sir David King. He tells Alex Martin that risk management is as relevant to preserving the planet as groundbreaking science
Wednesday 1st February 2023
Open-access content

Latest from November 2015

A car crash © iStock

UK insurers 'slow' to lower premiums in response to whiplash reforms

UK motor insurers will probably only cut premiums slowly in reaction to the government's crackdown on whiplash injury claims, Fitch Ratings has said.
Monday 30th November 2015
Open-access content
Colourful houses in Bermuda © Shutterstock

Bermuda gains full Solvency II equivalence

Bermuda has been granted full equivalence by the European Commission (EC) to comply with the Solvency II directive.
Monday 30th November 2015
Open-access content
ta filler

Autumn Statement tackles flood risk and social care

The Institute and Faculty of Actuaries (IFoA) has welcomed Chancellor George Osborne's Autumn Statement announcement of funding for flood defence schemes, but has warned that measures announced to address social care funding may fall short.
Thursday 26th November 2015
Open-access content

Latest from small_opening_image

2

COVID-19 forum for actuaries launched

A forum for actuaries has been launched to help the profession come together and learn how best to respond to the deadly coronavirus sweeping the world.
Wednesday 25th March 2020
Open-access content
2

Travel insurers expect record payouts this year

UK travel insurers expect to pay a record £275m to customers this year as coronavirus grounds flights across the world, the Association of British Insurers (ABI) has revealed.
Wednesday 25th March 2020
Open-access content
2

Grim economic forecasts made as countries lockdown

A sharp recession is imminent in the vast majority of developed and emerging economies as the deadly coronavirus forces businesses to shut down across the world.
Tuesday 24th March 2020
Open-access content

Latest from 11

A car crash © iStock

UK insurers 'slow' to lower premiums in response to whiplash reforms

UK motor insurers will probably only cut premiums slowly in reaction to the government's crackdown on whiplash injury claims, Fitch Ratings has said.
Monday 30th November 2015
Open-access content
Colourful houses in Bermuda © Shutterstock

Bermuda gains full Solvency II equivalence

Bermuda has been granted full equivalence by the European Commission (EC) to comply with the Solvency II directive.
Monday 30th November 2015
Open-access content
ta filler

Autumn Statement tackles flood risk and social care

The Institute and Faculty of Actuaries (IFoA) has welcomed Chancellor George Osborne's Autumn Statement announcement of funding for flood defence schemes, but has warned that measures announced to address social care funding may fall short.
Thursday 26th November 2015
Open-access content
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Exposure Management Analyst

London, England
£40000 - £50000 per annum
Reference
148639

Pricing - Casualty Actuary

London (Central)
£128K + bonus + benefits
Reference
148638

Reporting Contractor

Negotiable
Reference
148636
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ