Risk and Actuarial Frontiers: Insights on Climate Risk and Insurance

Recognising the urgency of this issue, UNSW’s School of Risk and Actuarial Studies – in partnership with  UNSW Innovations in Risk, Insurance, and Superannuation (IRIS) Knowledge Hub and the UNSW Institute for Climate Risk & Response (ICRR)^[1] – hosted the 2023 Workshop on Risk and Actuarial Frontiers: Climate Risk and Insurance.

Expanding on the success from 2021 and 2022, the workshop  featured industry and research presentations, discussions, and networking opportunities for the 130 participants.

The aims of these workshop were to help participants to further:

• Understand the various effects of climate change to make informed decisions and create plans to mitigate them.
• Recognise the critical importance of affordable insurance and explore the societal structures needed to ensure fairness and ethical standards in our actions.
• Acquire the expertise and resources to handle climate-related risks more effectively resulting in the ability to adjust to changes . and identifying potential opportunities.

A welcome from the Head of School

Professor Bernard Wong, the Head of School, greeted the workshop participants  and provided an overview on the school’s research and educational initiatives – especially in the area of climate risk.

The emphasis was on the significance of collaborative partnerships with interdisciplinary research groups such as UNSW ICRR, CEPAR, UNSW Business AI Lab, and IRIS Knowledge Hub, along with research partners such as insurers, superannuation funds, government departments, and actuarial professions.

Understanding climate risk

Commencing Session 1, Professor Ben Newell, Director of UNSW ICRR, provided insights into perceive projections about future climate change.

Alex Pui from Commonwealth Bank stressed the importance of cross-disciplinary collaboration and emphasised climate analytics in regulatory exercises like climate stress tests^[2]. Tim Neal from UNSW ICRR highlighted the significance of external weather effects in projecting the economic impacts of climate change, focusing on GDP.

From the UNSW School of Risk and Actuarial Studies, Professor Qihe Tang and Eugenia Fang discussed understanding compound weather and climate events through the lens of systemic financial crises, revealing interconnected climate-related risks.

To conclude Session 1, James Basman from Allianz addressed the implications of climate change for financial risk management and discussed operational challenges in implementing climate risk management strategies.

Insurance affordability

Professor Jeremy Moss from UNSW’s Political Philosophy highlighted a societal framework that prioritises fairness. This was followed bySharanjit Paddam from Finity who discussed home insurance affordability and socioeconomic equity in a changing climate.

Alison Drill from Swiss Re shared insights on “Natural disaster risk and insurance affordability” with bushfire examples in the US. Actuaries Institute Council Member Elaine Collins then presented on the topic of “Cyclone reinsurance pool,” and Dr Fei Huang, encouraged thoughtful discourse on ethical considerations and regulatory responses to mitigate risks and ensure equitable outcomes for all stakeholders. This was followed by a lively discussion around the issues in insurance affordability.

This session was also featured in the article “Home insurance is on the rise. Is there an affordable solutions? in Business Think, UNSW Sydney.

Pricing for climate risk in financial institutions

This session featured insights from Lisa Ye of Suncorp and Dr Peiman Asadi of IAG on the insurance sector’s approach to provide coverage caused by natural perils at both an overview and special peril level. Dr Ramona Meyricke from IFM Advisors emphasised the importance of adaptation, resilience, and net-zero investment strategies.

Academics from the School of Risk and Actuarial Studies highlighted innovative approaches and robust modelling techniques for addressing climate challenges: Dr Matteo Malavasi (framework of the investment in the flood risk adaptation policy), Dr Patrick Laub (catastrophe risk models including Hawkes processes and probabilistic AI), Mr Yuhao Liu (utility indifference pricing of green bonds), and A/Prof Katja Ignatieva (electricity pricing model incorporating climate index).

Next steps

Following the successful of our recent workshop, we plan to continue to host a series of engaging workshops.  

Our next workshop. “Advancing the Retirement Phase of Superannuation”, organised by  IRIS Knowledge Hub, Business Insights Institute and the CEPAR, features  keynote speaker Prof Olivia S. Mitchell from Wharton, University of Pennsylvania –  is one of the world’s foremost pension economists.

She will be presenting on Understanding and Managing Longevity Risk in Retirement. This event will take place at Warrane Theatre, Museum of Sydney on 20 March 2024. 

Also, the 32nd Colloquium on Pensions and Retirement Research is scheduled for 27-28 November 2024 at Colombo House Theatres, UNSW Sydney. Co-hosted by CEPAR and the UNSW School of Risk & Actuarial Studies, this annual event provides a unique platform for academics, government officers, and industry professionals to discuss the latest research on pensions, superannuation, and retirement.

In December 2024, we anticipate organising another workshop on Frontiers in Risk and Actuarial Studies, featuring distinguished visiting academics with our faculty members.

Furthermore, building upon valuable insights gained from previous workshops, we persist in our collaboration with external partners in education and research domain to offer authentic learning opportunities and enable our students and academics to offer meaningful contributions to society. Contact us to connect with the UNSW School of Risk and Actuarial Studies.

References

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