Climate
The risks from climate change create uncertainty and threaten the stability of Canada’s ecosystems and economies, and the health of Canadians. An increase in insurance losses from extreme weather events as well as changes in mortality and morbidity rates due to an impact on health and longevity all become possible.
Actuaries ensure insurers are aware of the potential costs associated with climate change. Through their unique skills and expertise, actuaries consider the risks of climate change to ensure that insurance companies, social security programs and other companies have long-term financial viability. They also:
- develop solutions to mitigate the risks associated with climate change in a transitioning economy;
- establish the rates of insurance policies and ensure assets are available when they’re needed; and
- assist insurance companies and pension funds with being socially and environmentally responsible through their policies and investments.
As Canada and the world are faced with risks like global warming, extreme weather events, sustainability goals and transitioning to net-zero carbon, actuaries have a critical role to play in helping Canadians build a better, more stable financial future.
Climate Change and Sustainability Resources
- (CIA Public Statement) Public Statement: Time to Act: Facing the Risks of a changing climate Canadian Institute of Actuaries (CIA). 2019.
In the face of a changing climate, the Canadian Institute of Actuaries is calling for the following:- Prioritize data collection related to the financial impacts of climate-related events.
- Implement policies that accelerate climate-risk financial reporting requirements.
- Account for climate-related factors in investment decisions and corporate risk planning.
- (Paris Agreement/Canada’s Goals) Canada’s climate plan Government of Canada. Updated 2021.
Pan-Canadian Framework on Clean Growth and Climate Change, Canada’s Strengthened Climate Plan: A Healthy Environment and a Healthy Economy, carbon pollution, carbon pricing, climate change resilience, clean technology, and jobs. - (Paris Agreement) The Paris Agreement Overview United Nations. 2015.
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. The Paris Agreement works on a 5-year cycle of increasingly ambitious climate action carried out by countries. By 2020, countries submit their plans for climate action known as nationally determined contributions (NDCs). - (GHG Emissions) The Keeling Curve Scripps Institution of Oceanography.
The Keeling Curve is a daily record of global atmospheric carbon dioxide concentration maintained by Scripps Institution of Oceanography at UC San Diego. - (GHG Emissions) Bloomberg Carbon Clock Bloomberg.
The Bloomberg Carbon Clock is a real-time estimate of the global monthly atmospheric CO2 level. - (IPCC/GHG emission pathways) AR6 Synthesis Report: Climate Change 2023 Intergovernmental Panel on Climate Change.
The Intergovernmental Panel on Climate Change (IPCC) is the UN body for assessing the science related to climate change. The IPCC is currently in its Sixth Assessment cycle, during which the IPCC will produce the Assessment reports of its three working groups, three special reports, a refinement to the methodology report and the Synthesis report. - (GHG Emission/Climate Change) Decarbonization: A Briefing for Actuaries Discussion Paper International Actuarial Association (IAA) Resource and Environment Working Group. 2018.
This paper provides an introduction to the topic of decarbonization for actuaries around the world. Aspects covered include: the main types and sources of greenhouse gas emissions; relevant international agreements; commitments made; the policies adopted; likely future developments; and, observations on potential actuarial implications. - (Climate change impact on actuarial work) Climate Change for Actuaries: An Introduction Institute and Faculty of Actuaries (IFOA). 2019.
This report is an introduction to climate change for actuaries in all fields of work. It summarizes the impact of climate change on natural and human systems, the insurance industry, and capital markets. - (Climate change impact on actuarial work) Importance of Climate-Related Risks for Actuaries International Actuarial Association (IAA). 2020.
This paper is the first of a series of papers aimed at creating awareness and promoting actuarial approaches in climate-related risk management and reporting. It discusses the main components of the climate-related risks relevant to actuaries, their implications, the broad categories of actuarial work and the importance of climate-related risk to each category. The categories considered are actuarial modelling, product management, risk and capital management, investment management, and disclosure. - (P&C/Life&Health/Pension) Glossary of Defined Terms Used in IAA Climate-Related Risk Publications (IAA). 2023.
- (Life&Health) A Practical Guide to Climate Change for Life Actuaries Institute and Faculty of Actuaries (IFoA). 2019.
This guide provides life actuaries with an overview of how climate change impacts on life insurance and the particular areas of work for life actuaries. It covers changes to economic growth and performance in wider economies, investment over or underperformance, current mortality and insurance regulatory environment and morbidity and uncertainty around future trends, as well as the climate risks around physical, transition, and liability risk. - (P&C) A Practical Guide to Climate Change for General Insurance Practitioners Institute and Faculty of Actuaries (IFoA). 2019.
This guide provides general insurance practitioners with an overview of different aspects of insurance operations that may be affected by climate change. It highlights the impact of the climate change risks on pricing and underwriting, reserving, reinsurance, catastrophe modelling, investment, risk management, and capital management processes. - (Pension) A Practical Guide for Actuaries Working in Defined Contribution Pensions Institute and Faculty of Actuaries (IFoA). 2018.
This guide explains how climate risks may be relevant to defined contribution pension arrangements and is designed to support actuaries and others working in defined contribution pensions in exercising their judgement in this area. It is produced to support actuaries advising UK defined contribution pension schemes (trust, contract, and master trust), although some of the material may also be relevant for actuaries advising other types of pension schemes and in other jurisdictions. - (Pension) A Practical Guide for Defined Benefit Pension Actuaries Institute and Faculty of Actuaries (IFoA). 2017.
This guide explains where climate issues are relevant to pension schemes and the work of pension actuaries. It attempts at helping pension actuaries to assist their clients in navigating the uncertainties associated with climate issues, in collaboration with covenant and investment advisers. - (P&C) A framework for assessing financial impacts of physical climate change: A practitioner’s aide for the general insurance sector Bank of England. 2019.
The paper is developed to support the general insurance industry in managing climate change risk on the liability side of a firm’s balance sheet. It assesses the current tools used for measuring this risk. As well, it sets out recommendations for how the catastrophe analytics industry can contribute further by providing accessible tools and helping consolidate, distill, and highlight the most compelling research on the impact of climate change on natural disasters. - (P&C) Managing environmental, social and governance (ESG) risks in non-life insurance business United Nations Environment Programme. 2020.
This guide outlines eight areas comprising possible actions for insurers to manage ESG risks in non-life insurance transactions, focusing on risk assessment and insurance underwriting. - (P&C/Life&Health/Pension) Navigating Uncertainty in Climate Change Discussion Paper OSFI. 2021.
In January 2021, the Office of the Superintendent of Financial Institutions (OSFI) launched a three-month consultation with the publication of a discussion paper, Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks. The paper focuses on risks arising from climate change that can affect the safety and soundness of federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs). Through this consultation, OSFI is seeking to engage FRFIs, FRPPs and other interested stakeholders in a dialogue on climate-related risks. - (P&C/Life&Health/Pension) Guidelines on Environmental Risk Management (Insurers) Monetary Authority of Singapore. 2020.
These guidelines set out MAS’ expectations on environmental risk management for all insurers. The guidelines cover:- Governance and strategy
- Risk management
- Underwriting
- Investment
- Disclosure of environmental risk information.
- (P&C/Life&Health) The heat is on: Insurability and Resilience in a Changing Climate CRO Forum. 2019
- (P&C/Life&Health/Pension) OSFI B-15: Guideline on Climate Risk Management. 2023.
- (P&C/Life&Health/Pensions) Les incidences économiques de l’action pour le climat. 2023.
Achieving greenhouse gas emission reduction targets will play an important role for many public policies and will only be justifiable if all the economic and social implications are taken into account. This report attempts to improve the understanding of the macroeconomic impacts of the climate transition.
- (P&C/Life&Health/Pension) Introduction to Climate-Related Scenarios International Actuarial Association (IAA). 2021.
This paper was prepared by the Climate Risk Task Force of the International Actuarial Association (IAA). The paper provides helpful insights into the requirements for good scenario analysis, components from which scenarios can be assembled, and considers some of the tools available to actuaries. It reviews the challenges and barriers that need to be considered in the development or use of workable climate-related scenarios and how those barriers may impact planning and implementation of adaptation actions and building resilience. - (Pension) Climate Scenario Analysis for Pension Schemes: A UK Case Study Institute and Faculty of Actuaries (IFoA). 2020.
This paper explores how climate scenario analysis can be used as a tool for forward-looking assessment of the risks and opportunities for defined benefit pension schemes and other financial institutions. It is intended to provide an example of how pension schemes can integrate climate change into their thinking on matters such as funding strategies and long-term strategic asset allocation, and should prove useful to pension actuaries and other advisors who are seeking to give specific consideration to climate risks in their advice to scheme trustees and sponsors. - (P&C/Life&Health/Pension) The 2021 biennial exploratory scenario on the financial risks from climate change Discussion Paper Bank of England. 2019.
This discussion paper aims to examine the financial risks posed by climate change. The exercise will test the resilience of the current business models of the largest banks, insurers and the financial system to climate related risks and therefore the scale of adjustment that will need to be undertaken in coming decades for the system to remain resilient. - (Pension) Climate Scenario Analysis for Pension Schemes: An illustration of potential long-term economic & financial market impacts Institute and Faculty of Actuaries (IFoA). 2020.
This paper examines the long-term economic and financial impacts projected by a model that combines climate science with macro-economic and financial effects to examine the relative impacts of three different climate pathways. A presentation is also available. - (Transition Risk) Managing Climate and Carbon Risk in Investment Portfolios Society of Actuaries (SOA). 2018.
This report focused on analyzing climate change and carbon risk in the equity investment portfolios of insurance company and pension fund assets. - (P&C/Life&Health/Pension) Investing in a time of Climate Change – the sequel Mercer. 2019.
This is the latest climate scenario model for assessing the effects of both climate-related physical damages (physical risks) and the transition to a low-carbon economy (transition risks) on investment return expectations. The Sequel models three climate change scenarios, a 2°C, 3°C and 4°C average warming increase on preindustrial levels, over three timeframes – 2030, 2050 and 2100. - (Pension/Webcast) Climate Scenario Analysis Including a Pension Case Study Canadian Institute of Actuaries (CIA) Climate Change and Sustainability Committee (CCSC). 2020.
- (P&C/Life&Health/Pension) CIA Climate Change Scenario. 2021.
- (P&C/Life&Health/Pension) CIA Webcast: Climate Risk Modelling – Scenario Analysis (in partnership with Moody’s). 2023.
A walkthrough of Moody’s Analytics take on climate risk modelling and impacts for the insurance industry. - (Canada’s Goals) Canada’s Energy Future 2023: Energy Supply and Demand Projections to 2050. 2023.
This series investigates the impact of various energy sources for Canadians over the long term, while focusing on the achievement of net-zero greenhouse gas emissions by 2050 via various scenarios. The series is designed for Canadians and policy makers alike, covering all energy commodities and all Canadian provinces and territories. - (P&C/Life&Health/Pension) The Emperor’s New Climate Scenarios (IFoA). 2023.
This paper furthers the reader’s understanding of climate change and enlightens as to how to improve climate-scenario modelling for financial services institutions. The report outlines key challenge areas, the development of scenario techniques to better capture climate risks and the appropriate risk assessment needed to generate better collaboration to avoid the materialization of risks. - (P&C/Life&Health/Pension) No Time to Lose – New Scenario Narratives for Action on Climate Change (University of Exeter). 2023.
This report calls for immediate and significant shift in the climate scenarios used by investors, governments, and businesses to properly address the implications of climate change. It showcases four new climate scenarios that span shorter (and more realistic) time horizons to allow for better investment decision making. - NEW! (Nature) Integrating Nature in Climate Scenario Analysis for Enhanced Resilience (Canadian Institute of Actuaries). 2024.
This CIA statement discusses the issue of nature-related risk as an important co-consideration that must be included in climate risk analysis, framework development and reporting. It demonstrates the necessity of considering biodiversity loss and ecosystem degradation alongside climate risk.
- (Extreme Weather/North America) Actuarial Weather Extremes Monthly Report Series Society of Actuaries (SOA). 2021
This monthly report series identifies and examines weather extremes in North America. Using data from several sources, the reports identify and summarize unusual or extreme single-day or multi-day weather events. - (P&C/Extreme Weather/Global) International Catastrophe Pooling for Extreme Weather Society of Actuaries (SOA) and Institute and Faculty of Actuaries (IFoA). 2019.
The Society of Actuaries (SOA) and the Institute and Faculty of Actuaries commissioned the International Catastrophe Pooling for Extreme Weather research study to analyze the main catastrophe pooling structures currently in place, including the strengths and weaknesses of their designs, and suggest possible improvements and expansions to better address small nations’ insurance needs. - (Life&Health/Global) Lancet Countdown Report on Health and Climate Change The Lancet. 2020.
The 2020 report of the Lancet Countdown on health and climate change: responding to converging crises tracks the emerging health profile of the changing climate that is relevant to life and health actuaries. - (Life&Health/Global) Climate Change and Mortality International Actuarial Association (IAA). 2017.
This paper includes a summary of some of the leading research done by major organizations around the world. It describes some of the possible future impacts on the total global population, particularly vulnerable population segments and the portion of the population covered by insurance and retirement programs. - (P&C/Life&Health/Floods/Global) Flood Risk Discussion Paper International Actuarial Association (IAA). 2019.
This discussion paper provides a description of flood risk and how it can be managed. It is intended to provide a fundamental background and encourage discussion on this important topic for use by actuaries, regulators, and public policy planners around the world. Aspects covered include: the entire flood risk management process, methods that can be used to assess, mitigate, and finance the risks involved, the role of insurance and governments, public policy implications, and the role of actuaries. - (Changing Climate/Canada) Canada’s Changing Climate Report Government of Canada. 2019.
The purpose of this report is to provide a climate science foundation for the other National Assessment products. Its objectives are to assess current knowledge about how Canada’s climate is changing and why, and what changes are projected for the future, to help inform mitigation and adaptation decision-making, and to help raise public awareness and understanding of Canada’s changing climate. - (P&C) The Climate Change Adaptation Gap: An Actuarial Perspective (IAA). 2023.
- (P&C/Life&Health/Pension) The 2023 Climate Risk Landscape (TCFD). 2023.
- (Extreme Weather/North America) Extreme wildfires are here to stay. Can human beings really fight them? Financial Times. 2023.
*Editorial* The author goes into depth about common beliefs of changing wildfires and demystifies some open questions on how to best prevent future forest fires. - (Extreme Weather/North America). L’homme a mangé la terre. Jean-Robert Vallet. 2019.
This film tells the story of the factors pushing us towards the exploitation of resources and fossil fuels, industrial agriculture, agribusiness, the arms industry and the automotive industry. The reader understands the influence of industrial companies on political choices and the urgency of reforming the current economic and financial system. - (Extreme Weather/Polycrisis/Scenario Analysis) Energy Transition and Geoeconomic Fragmentation Implications for Climate Scenario Design. Charlotte Gardes-Landolfini, Pierpaolo Grippa, William Oman, and Sha Yu (IMF). 2023.
A note written by IMF staff members (that does not necessarily represent the view of the IMF) underlining that the broader context of the ongoing polycrisis can affect future decarbonization scenarios. In this context, the note assesses the implications of the polycrisis for hypothetical scenarios used to assess climate related-risks and proposes potential adjustments to the design of the climate scenarios used by financial institutions, central banks, and financial sector supervisors and regulators within their risk management frameworks. - NEW! (Extreme Weather/Regulation/Global) IAIS outlines actions for insurance supervisors in addressing natural catastrophe protection gaps (IAIS). 2023.
The IAIS emphasizes that insurance supervisors should employ supervisory action to help alleviate current natural catastrophe (NatCat) protection gaps. Their published report outlines five areas where supervisors can help address NatCat coverage gaps, using reference to actions currently taken by IAIS members and further forward-looking engagement. - NEW! (Life&Health/P&C/Pension) Climate Change – Technical Paper for Appointed Actuaries (Institute of Actuaries of Australia). 2023.
Intent for Appointed Actuaries, this paper outlines how insurance carriers may be impacted by climate change and provides suggestions on how to specifically address these in a Financial Condition Report. The paper is meant to complement CPG229 Climate Change Financial Risks, CPS220 Risk Management and CPS510 Governance with specific reference to climate risks and opportunities and to address tham as part of statutory requirements (if these risks are material).
- (US/Canada) Actuarial Climate Index (ACI) AAA, CIA, CAS and SOA. 2019.
The ACI is sponsored by 4 actuarial organizations. The six components of the Actuaries Climate Index are:- high temperatures
- low temperatures
- heavy rainfall
- drought (consecutive dry days)
- high wind
- sea level
- (Global) Global Climate Risk Index German Watch. 2021.
The Global Climate Risk Index 2021 analyzes to what extent countries and regions have been affected by impacts of weather-related loss events (storms, floods, heat waves etc.). The most recent data available — for 2019 and from 2000 to 2019 — was taken into account. - (Global) Climate Change Knowledge Portal World Bank. 2021.
The Portal provides an online platform for access to comprehensive global, regional, and country data related to climate change and development. Users can achieve the following:- Learn about climate and climate related datasets at the global, regional, and country level.
- Enhance knowledge on climate change related topics, including exposure, vulnerability, sectoral impacts, and adaptation options.
- Assess, visualize, and download resourceful climate data and information.
- (Global) INFORM Risk Index European Commission. 2020.
The INFORM Risk Index is a global, open-source risk assessment for humanitarian crises and disasters. It can support decisions about prevention, preparedness, and response. It includes:- Results and Data
- Country Profile
- Subnational Risk
- INFORM Epidemics
- Dashboard.
- (Global) ND Gain Country Index University of Notre Dame. 2022.
The ND-GAIN Country Index summarizes a country’s vulnerability to climate change and other global challenges in combination with its readiness to improve resilience. It aims to help governments, businesses and communities better prioritize investments for a more efficient response to the immediate global challenges ahead.
The Financial Stability Board has created a Task Force on Climate-related Financial Disclosures (TCFD) that has published recommendations on the disclosures to be made in financial statements. These recommendations were approved by the G-20 in July 2017 but are not mandatory. However, a growing number of enterprises, asset owners, and asset managers have confirmed they will comply with the recommendations as reported on the TCFD website.
- (Life&Health/P&C/Pension) TCFD Implementation Guide Climate Disclosure Standards Board (CDSB). 2017.
The TCFD Implementation Guide developed by the Sustainability Accounting Standards Board (SASB) and Climate Disclosure Standards Board (CDSB) aims help companies enhance the robustness, consistency, comparability, and utility of TCFD implementation and reporting through SASB and CDSB’s market-tested frameworks, standards, and resources. - (Life&Health/P&C/Pension) Navigating climate scenario analysis – a guide for institutional investors Institutional Investors Group on Climate Change (IIGCC). 2018.
This guide serves as a “how to guide” for institutional investors who are beginning to construct and conduct scenario analysis, in accordance with the TCFD framework. The guide explains the concept behind scenario testing and establishes a framework for scenario analysis, including the setting of objectives in performing the testing, understanding and selecting climate scenarios, applying climate scenarios to develop appropriate investment parameters and inputs, and review and disclosure of results. - (Life&Health/P&C/Pension) User Guide to Climate-related Financial Disclosure Institute and Faculty of Actuaries (IFoA) 2020.
The User Guide to Climate-related Financial Disclosure was produced by a joint working party set up by the Institute and Faculty of Actuaries (IFoA) and Institute of Environmental Management & Assessment (IEMA). It aims to help a wide range of stakeholders, from risk management specialists and sustainability practitioners, investors, lenders, and insurers, through to interested members of the public understand the disclosure requirements that follows the TCFD recommendations. - (Pension) Discussion paper: Pension Fund ESG Risk Disclosures; Developing Global Practice International Actuarial Association (IAA). 2020.
The discussion paper summarizes the main features and trends in pension fund Environmental, Social and Governance (ESG) risk disclosures around the world available to regulators, members, and the public. - (P&C/Life&Health/Pension) Climate-Related Disclosures and Risk Management: Standards and Leading Practices (IAA). 2022.
- (P&C/Life&Health/Pension) Recommendations of the TNFD (TNFD). 2023.
The Taskforce on Nature-related Financial Disclosures (TNFD) has developed a set of disclosure recommendations and guidance for organisations to report and act on evolving nature-related dependencies, impacts, risks and opportunities. The TNFD disclosure recommendations are structured around four pillars, consistent with the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB).
- Research on Emerging Topics Society of Actuaries (SOA).
- Catastrophe & Climate Strategic Research Program Newsletter Society of Actuaries (SOA). 2021.
- Environment and Climate Change Canada: 2023-2024 Departmental Plan. 2023.
This publication outlines Environment and Climate Change Canada (ECCC)’s strategy to support clean growth, address climate change, prevent and mitigate pollution, conserve nature, and improve the predictability of weather and environmental conditions.