July 20, 2022

Climate Risk and Actuaries

Climate Risk and Actuaries

As we come to terms with yet more global temperature records being broken across the UK this week (July 2022) and communities struggling to deal with the impact, here's a chilling thought:

Imagine looking back at this summer in 20 years time as the good old days when summers were cooler and more bearable.

Yet, that is potentially the direction we are heading as global warming and climate change appears to ramp up it's effect.

After all, the heatwave we are currently experiencing here in the UK isn't a regional heatwave as usual. Instead we appear to be undergoing a global heatwave, as multiple heatwaves around the world have broken previous temperature records.

Portugal, for example, reached 45 degrees Celsius (113 degrees Fahrenheit) on July 13 2022 causing widespread wildfires. Tunis, in Tunisia, hit 48 degrees Celsius breaking a 40-year record and in June 2022 Japan saw the worst heat wave in its history.

The science is extremely strong that this is not an outlier year and that things will not return to more normal in the near future.

A quick scan of the UK data highlights just how the current temperatures we are experiencing are quickly becoming the 'new normal'.

The five hottest days on record in the UK are at the time of writing (20th July 2022) as follows:

40.2 degrees Celsius (July 2022)

38.7 degrees Celsius (July 2019)

38.5 degrees Celsius (August 2003)

38.1 degrees Celsius (July 2022)

37.8 degrees Celsius (July 2020)

37.1 degrees Celsius (August 1990).

The risks of the current path we are on are significant, potentially catastrophic and downright scary.

As the predictors of complex risks, actuaries are well placed to help model and make sense of some of the repercussions of climate change.

Source: https://earthobservatory.nasa.gov/ 

Health and Mortality Risks

One particular risk category, of actuarial interest, relates to the health and mortality risks caused by a warming planet.

The mortality repercussions are not always obvious, but here are 3 of the big health and mortality risks we may be exposed to as a result of a warming planet:

1. Extreme weather events

As we have witnessed in recent years, a warming planet brings with it all sorts of different potential extreme weather events that have potential repercussions for our health and mortality rates. For example wildfires, caused by heatwaves already cause more than 33,000 deaths globally per year.

Then we have droughts, floods and freak storms to name just a few of the potential hazards we will likely increasingly have to contend with.

2. Exacerbation of current conditions

Heat places the body under a great amount of stress putting the respiratory and cardiovascular systems at risk.

The very young and old are particularly vulnerable.

The Climate Impact Lab conducted an interesting study on the largest data set ever compiled on subnational human mortality around the world. Their study quantified the relationship between temperature and death rates across the globe and found that "On average, a single hot day increases mortality rates by 4 deaths per 1 million people".

3. The unknown unknowns

Finally, we should always keep in mind that there are many other potential 'black swan' events that may result from a changing environment and ecosystem. Many health and mortality risks we face in the future may be a result of factors and interactions that we simply cannot foresee with our limited knowledge.

The extent to which the population is truly at risk from global warming as far as health and mortality is concerned, is very difficult to gauge. However it seems this is an area where actuaries should be paying attention and can help understand the future risks.

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Mark Farrell FIA PhD

I'm a UK qualified Actuary and currently a Senior Lecturer of Actuarial Science at Queen's University Belfast. Prior to academic life, I spent 10 years working as a consulting actuary.

Mark Farrell

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