Environment and societal risks are increasingly affecting the social, business and financial world.
In order to determine what changes and measures need to be taken, long-term risk managers are needed to assess these developments meaning that the Sustainability practice area is of crucial interest to actuaries.
This area helps develop appropriate responses to risks by identifying the implications for actuaries and their clients.
The largest threat actuaries analyse is climate change. This is due to the impacts it can have on other practice areas such as;
- pension actuaries in terms of the potential impact on investment values, investment returns, funding strategies, mortality and demographics, and sponsor covenants
- general insurance actuaries in regard to climate-related property claims, business continuity risks, liabilities to third parties, and for insurers of directors and trustees
- life and health actuaries in regard to investment values and trends in mortality and morbidity
- finance and investment actuaries in terms of the impact on investment risks, returns, and hence strategy, and the development of innovative investment vehicles to assist in climate change adaptation and mitigation
- risk management in developing methodologies to recognise the impact climate change could have on insurance products, markets, reserving, and regulation.
As such, actuaries within the Sustainability practice area will work alongside other areas to respond to these issues efficiently.