I could not resist responding briefly to the debate on climate change risk in Septembers edition
I could not resist responding briefly to the debate on climate change risk in September's edition (bit.ly/2cTz7dA), writing as an actuary who spent four full years studying climate change models.
Firstly, with regards to the unknowableness of climate changes and whether the cause of these trends is anthropogenic. To a large extent this doesn't matter. Any reasonable person would admit there is certainly some evidence that changes in the climate can happen and that this could have a material impact on our work over the next 20-30 years. There is no need to prove the point if there is enough evidence of a risk.
Secondly, to the IFoA Resource and Environment Board point that "actuaries are not currently qualified to critique the technical content of these models". It is a worthwhile debate how actuaries/anyone should inform decisions based on uncertain/inadequate models. But we deal with very complex risks all the time - climate is arguably better understood, with far more data, than cyber, terrorism or certain financial lines. Not to mention the hurricane models used in the London Market on a daily basis (which indeed form the basis of climate models). Climate really isn't that much harder than other models we deal with.
Lastly, both Geoff Dunsford's letter and the IFoA Resource and Environment Board discussed whether we should increase premiums in response to climate change. Even if it is right to increase premiums for climate risk, it may be a greater business risk to do so in a competitive environment where few other companies will follow suit. Without consensus, higher premiums are probably an unachievable luxury.
Let's not do ourselves a disservice that climate is somehow too hard for actuaries, and avoid getting bogged down in the provability of science that can already usefully inform decisions, albeit with uncertainty.
Ed Tredger, FIA, PhD