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Actuarial Climate Index

Posted: 09 Jul 2018, 13:41
by Amanmadaan
The Actuaries Climate Index (ACI)

●The Actuaries Climate Index (ACI) is an index of climate risks which measures climate risks on the basis of a basket of extreme climate events and changes in sea level.
●Increasing values in the index point to increased occurrences of extreme climate events.
●The ACI methodology uses a 30-year reference period of 1961 to 1990, and over that period, the average index is nearly zero.

Learning about Actuaries Climate Index in US AND CANADA Combined

●The five-year moving average, which smooth out the monthly and seasonal fluctuations, has slowly risen as we move away from 1990.
●The user can observe that climate risks have multiple impacts and these vary by region and component, allowing for informative comparisons and analyses .

The ACI continued to be near zero until about 1995, after which all but four seasons were positive, i.e., greater than the average. From 1996 , the ACI started increasing and in 2000 it rose nearly to (0.75) and from 2010 to 2016 it is nearly around (1 and above). The Index in the past 20 years has been driven upward primarily by more warm/hot temperatures, fewer cool/cold temperatures, higher sea levels, more heavy precipitation, and more drought.
●The Warm temperature Index, started increasing from 1996, and later in 2010 reached around (1.2) and in 2016 rose to (2.2).

●The Cool temperature Index, started falling from 1985, in 2000 reached (-1) and in 2010 to 2016 it reached (-1.8).

●The Sea Level Index, started rising from 1995 reached (1.4) in 2000 and after that decreasing slowly and reached (0) again in 2003 and after that rising constantly and reached (2.3) in 2016.

●Extreme Precipitation Index, nearly (0) till 1995 and afterwards started rising and had a downfall in 2003 and reached (0) again and later on in 2010 reached till (1.2) and in 2016 reached (1.8).

Actuaries have been working on the index for a couple of years. Historical data has shown that over the past few years, the frequency of extremely hot days has increased, while the frequency of extremely cold days has decreased. The overall ACI climbed from the 1990s on, though it appears to have leveled off in recent years.

“The index is an educational tool that could help pricing actuaries incorporate long-term trends into their mathematical models; it could also help actuaries and others working in enterprise risk management by quantifying the risk in a subtle, long-term trend.”