By Lisa Slotznick
I’m not breaking any news when I tell you that 2024 is an election year—for president, Congress, and numerous state and local offices. I’m not looking forward to the robocalls, the avalanche of email solicitations, and the paper mail flyers. But as an actuary and an engaged citizen, I am eager for a robust discussion of issues—particularly related to the U.S. financial system.
With the election in mind and the Academy’s mission to serve the public and the U.S. actuarial profession, the Academy in 2024 will be highlighting several mega issues: Social Security, health care, artificial intelligence (AI), climate risk, cyber, and risk management.
These mega issues are not new to the Academy, but rather reflect our focus over the past few years. OK, some are evergreen—Social Security, health care, and risk management are always top of mind. But AI, climate risk, and cyber are areas where we have recently expanded our focus. All look to the future—not only of our work as actuaries, but also to our personal future. After all, we are all members of the public we serve. As the year unfolds, watch for highlights on each of these areas in Academy publications.
To get us started on these mega issues, I will highlight some of the issues and work that the Academy has done in climate.
Climate issues encompass several areas. To name a few:
- Climate trends (temperature, rainfall, sea level rise);
- Climatic events (hurricanes, convective storms and wildfires);
- Availability and affordability of insurance, particularly homeowners’ insurance, to protect property impacted by climatic events;
- Health care impacts from wildfires, heat events, and freeze events;
- Financial inequities related to the disproportionate impact on disadvantaged individuals related to health/property/employment impacts of climatic events;
- Corporate responsibility for the environment manifested by disclosures in financial statements or supplements to financial statements; and
- Longer-term issues related to investment returns, migration trends, and impacts on longevity—specifically, a healthy longevity.
The Academy’s climate-related work provides awareness of these issues through multiple work products, with a focus on the data actuaries use and the impacts to the financial systems that overlap with where our expertise comes into play.
- The Actuaries Climate Index1 (ACI)—developed in cooperation with the Canadian Institute of Actuaries, Casualty Actuarial Society, and Society of Actuaries and updated quarterly—is an index of historical data related to extremes of temperature highs and lows, wind, drought, rainfall, and changes in sea level. The index shows in the aggregate and by region that these extremes have been generally increasing. The Actuaries Climate Risk Index (ACRI), exposed to date as a draft, but in development to be analogous to the ACI, includes exposure to loss as well as dollars of loss.
- Climate disclosures for insurers. The Climate-Related Financial Disclosures Subcommittee of the ERM/ORSA Committee works with NAIC disclosure data to provide input to the NAIC and regulators related to developing updated disclosure requirements for insurers and training on ways to use the disclosure data that insurers have submitted.
- Climate awareness. The Climate Change Joint Committee has prepared several documents to start educating actuaries and public policymakers on basic climate impacts that actuaries may encounter.2
- Policymakers. During 2023, the National Oceanic and Atmospheric Administration (NOAA) and the National Science Foundation (NSF), with facilitation by the Academy through three webinars, promoted potential research by academic institutions to marry the work of catastrophe modelers with that of climate modelers. The results will be relevant for insurers and use or improve data available from NOAA. These agencies recognized the potential of actuaries through the Academy to help translate and link these two disciplines.3
As actuaries, we need to recognize that our data includes the impacts of climatic events and will continue to do so. Any change in the trends and frequency of these events may take some time to be noticeable in data, but the associated uncertainty and risks may be an appropriate component of disclosures. The build-out of how actuaries adapt their models and work to reflect the changes in climate trends in underlying data varies by practice area and exposure within practice area, but will take an increasing focus going forward.
Our job is to put a spotlight on the uncertainties, quantifying where we can. As actuaries, our next steps will be to bring this awareness to our models, work products, and financial systems. May we keep our eyes open and shine this spotlight on climate and other mega issues.
LISA SLOTZNICK, MAAA, FCAS, is president of the Academy.
Endnotes
- The ACI website is at actuariesclimateindex.org.
- Links to a glossary of terms, an ESG issue brief, and a paper on climate risks to the financial systems are available at actuary.org/CCJC.
- For recordings of these webinars, visit www.actuary.org/NOAA-NSF_Climate_Webinar_Series.
