PAVING THE PATH TO DECARBONISATION

The Journal, Chartered Insurance Institute: 22.4.22.

https://thejournal.cii.co.uk/2022/04/22/paving-path-decarbonisation: This is a sequel to – TAKING THE WHEEL ON CLIMATE CHANGE (December 20, 2021), where I highlight the role of climate change in driving major changes to insurance supervision and regulations in the US. And here, the actuarial profession under the spotlight.

Borrowing from Doug Sheridan: “15 months into his Presidency, many of Biden’s voters are still waiting for him to deliver on his climate pledges. And for young people in particular-frustration has turned to anger… pace of the admin’s climate action has slowed to a trickle.”

However, there is a silver lining: Wind-Water-Solar provided 96.34% of all new US electrical nameplate capacity in the first two months of 2022. Also, in Jan/Feb 2022, U.S. renewable output was 22.8% of all electricity generation versus 19.7% in 2021 (www.renewablesnow.com).

The good part is the executive continuing to nudge the regulators to align the insurance industry with the goals of #parisagreement. Much of this sequel relates to the growing role of the actuarial profession in the climate space.

Climate Science: A Summary for #Actuaries, presented on April 13th, 2022, summarises the #IPCC’s Sixth Assessment Report (AR6) Working Group I (WGI) report in a manner tailored for the actuarial community. Actuaries, it emphasises, as risk professionals need to understand the physical impacts of climate systems and climate changes. Such impacts will affect how risks are underwritten, priced, managed, and reported, whether for general, life or health insurance, pensions, other financial institutions, or social security. It is important for actuaries to understand the magnitude of the potential changes, the uncertainty of their frequency and intensity, and the inherent volatility of such risks.

At a recent online event I asked the IAA panel – How can the IAA influence particularly North American insurers to cut their fossil fuel exposure?

Gabor Hanak, Chair of the Climate Risk taskforce answered: “IAA is not a lobbying organisation. Our influence is entirely through our contributions, papers and discussions. What’s more, the IAA is a global organisation and there is a basic principle how the IAA is operating, it is called the principle subsidiarity. So the IAA will never interfere with region’s policies unless the respective actuarial organisation in that region requests to do so. I don’t think it will happen in terms of North America.”

“If it’s not already, climate and #climate#riskmanangement need to move to front of mind for every organisation – quickly. This is not based merely on ideology, but on the undeniable link to risk management and our responsibilities as custodians of our organisations. Governance Institute of Australia’s Guide for boards and management on the path to net zero will assist with this mindset shift”, says Megan Motto 😊, CEO of the institute. The report has significant inputs from eminent actuaries.