Monitoring Climate Change - Part 1

Our very first weekly Act from TAC!
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03 Jul 2018, 23:26

For actuaries, the first and foremost step towards being able to understand the implications of climate change & to come up with climate models to assess its impact on claim costs, is to have an appropriate metric in place to quantify the underlying changes in a variety of climate-related variables over time.  
This article focuses exclusively on one such measure, namely, the “Actuaries Climate Index (ACI)”, which is a systematic index of six key climate statistics, that were selected because they are representative of the key impacts of climate on people and the economy.

Development & Design of ACI:
  • Developed collaboratively among 4 North American actuarial organizations (the Canadian Institute of Actuaries, the Society of Actuaries, the Casualty Actuarial Society, and the American Academy of Actuaries) with climate expertise and research provided by Solterra Solutions
  • Intended to provide a useful monitoring tool—a “Climate at a Glance” indicator to help actuaries, public policy makers, & the general public learn more about extreme weather and its associated risks
  • Updated quarterly, designed to be statistically robust, and yet easy to understand
  • Tracks changes in a variety of climate-related variables over time
  • As it is based on actual historical data, the Index is retrospective and does not provide projections about future events
About ACI:
  • ACI has six components, namely:
  1. High temperatures;
  2. Low temperatures;
  3. Heavy rainfall;
  4. Drought (consecutive dry days);
  5. High wind; and
  6. Sea level
  • Each of these is a monthly time series beginning in 1961 based on measurements from an extensive network of meteorological stations and coastal tide stations within the United States and Canada
  • The ACI reflects how these components can be expressed in terms of the statistics of weather and sea level
  • Of particular interest is how the shape of the probability distribution function (PDF) of a certain component changes with time
  • Often, looking at the behavior of mean quantities is considered sufficient; however, because an increased frequency or intensity of climate extremes has been known to have detrimental impacts on society, the ACI prioritizes information on changing extremes
  • Hence where possible, the components measure extremes, rather than averages, because extremes have the largest impact on people and property
  • All data is standardized to measurements over the 30-year reference period of 1961 to 1990, which was the earliest available 30-year period with good data, i.e., there were fewer quality-controlled stations in the source data prior to 1961
  • The key metric is a five-year moving average. This five-year period was carefully chosen as the most efficient time period to reduce the noise of the time series data and allow users to see a clear climate signal
  • Users can follow changes in the ACI and its individual components, for Canada and the United States separately, the Canada-U.S. regions combined, as well as 12 sub-regions at
The articles to follow up will discuss in detail each of the components that make up the ACI, construction of ACI and the corresponding trend of these variables over the years.
  1. “Actuaries Climate Index; Development and Design, ... sh5.18.pdf

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