Actuarial Society sets up climate change committee

The Actuarial Society of SA has created a climate change practice area to help the industry quantify risks and financial impacts of long-term shifts in global temperatures and weather patterns.

Society president Tjaart Esterhuyse, who also heads RGA EMEA Explore, announced the new climate change committee to more than 1,700 actuaries at Assa’s 2022 convention on Thursday.

“Climate change is happening all around us, and we are going to see more and more unpredictable weather patterns and potentially catastrophic events,” said Esterhuyse.

“So put your thinking hats on and wonder how we, as actuaries, can help improve our future.”

As financial services companies ranging from banks to asset managers come under increasing pressure to curb financing for carbon-intensive business practices key corporate decision makers are increasingly turning to actuaries to quantify the risks associated with climate change and how it might affect their industries.

“Until now, our focus on climate change has been at working group level within the Assa financial and enterprise risk management committee, which is driven by actuaries working mainly in the climate change space,” said Esterhuyse.

“By dedicating a practice area committee to climate change, we acknowledge that the risks are multifaceted and that we need to widen the scope of our efforts to include all practice areas as well as actuaries working for key stakeholders such as the regulator.”

Ronald Richman, the current chair of Assa’s financial and enterprise risk management committee and chief actuary at Old Mutual Insure, has been tasked with setting up the Assa Climate Change Committee. The move comes after Assa’s financial and enterprise risk management committee identified climate change as an emerging risk management area for actuaries about two years ago.

“We set up a climate change working group to look at the role of SA actuaries in identifying and quantifying climate change risks and what tools and guidance they would need,” said Richman.

“On the back of this work, it became clear that climate change risks will be felt by all actuarial practice areas and beyond and we agreed that it was time to continue our work at committee level.”

Richman says climate change risks extend far beyond natural disasters such as the devastating flooding that occurred in Kwazulu-natal and the Eastern Cape earlier in 2022 as the phenomenon is emerging as systemic problem for the global economic system. By extension it has direct implications for the world’s financial system.

“We need to look beyond the obvious physical risks created by natural disasters and their immediate impact on shortand long-term insurers,” he said.

“We also have to consider transition risks such as the exposure of financial institutions to fossil fuel assets, the impact of a reluctance to invest in carbonheavy industries such as traditional power producers, and the effect of rising sea levels and heat stress on buildings.”

Assa’s climate change committee will continue to closely follow international trends through active participation in the climate risk task force appointed by the International Actuarial Association (IAA).

To ensure the committee’s effectiveness, at least one actuary from each major area of actuarial practice in SA will be required to participate in its functions while at least one Assa council member will be represented on the committee.

An invitation will also be extended to the Financial Sector Conduct Authority (FSCA) to place an actuary who is a staff member on the committee, which plans to hold its first meeting after the 27th UN Climate Change Conference of Parties (COP27).

The climate conference is scheduled to take place from November 6-18 in Sharm El Sheikh, Egypt.

The new committee will be tasked with improving the actuarial industry's ability to quantify the risks and financial impacts of global climate change