In response to Geoff Dunsfords letter Why leave climate change risk evidence unexamined?
In response to Geoff Dunsford's letter 'Why leave climate change risk evidence unexamined?', the IFoA's Resource and Environment Board would like to comment that climate science is a separate discipline to actuarial science and one of immense complexity, with many potential influences on the short- and long-term evolution of the climate.
As a result, there are many climate models, each incorporating different drivers and projecting the future climate over different time horizons.
These have been built by teams across the scientific community over a number of years, applying their own rigorous peer review and challenge process. Actuaries are not currently qualified to critique the technical content of these models.
Of course, as actuaries, we recognise that these models are not strict predictions of the future, but rather are guides to our actions and advice.
The statements Dunsford identifies in the 2012 report Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation highlight the inability, at that time, to attribute the cause of some historic trends with statistical significance to anthropogenic greenhouse gases.
But this is far from a statement that no deviation from historic norms should be expected in future. Good risk management anticipates risks and takes increasing action as evidence emerges. There is overwhelming consensus among climate scientists that in future we should expect and plan for higher mean temperatures and greater variations in weather and climate.
Insurance premiums and reserves should contain an allowance for extreme risk to ensure the survival of the insurer, or the insurance itself may be worthless. The size of reserves is a matter for individual insurers and their regulator.
That bodies such as the Bank of England and the Prudential Regulation Authority realise that climate change has the potential to be an extreme risk and have asked insurers to consider the impact on [their business] furthers the research of this topic by actuaries and contributes to the transparency and rigour that Dunsford craves.
IFoA Resource and Environment Board
22 July 2016
