New climate index launched

New climate index launched | Insurance Business

New climate index launched

The Actuaries Institute has developed a new tool for monitoring climate trends.

The Australian Actuaries Climate Index (AACI) tracks changes in the frequency of extreme high and low temperatures, heavy precipitation, dry days, strong wind, and changes in sea level to help people understand how extreme weather – and risk levels – may be shifting as a result of climate change.

Elayne Grace, Actuaries Institute chief executive, said the index “will assist businesses to assess and report risks from climate change, and Australians more generally will be able to look at the data and see what’s going on.”

“We believe this initiative is a positive step towards helping regulated entities to understand and manage the potential impact of climate risk on their businesses,” said Geoff Summerhayes of APRA, which last year warned that the risks of climate change were “foreseeable, material and actionable now.”

The first AACI report will be released on Nov. 12, covering the period 1981 to 2018, with index to be updated each quarter.

According to the first AACI, the frequency of extreme conditions in autumn 2018 was higher than historical extremes for autumns in the baseline period from 1981-2010. The frequency in the baseline period has been exceeded in every season but one since 2010. The results are compared to a 30-year reference period, mostly focusing on the 99th percentile of observations.

The Actuaries Institute said the climate index is just the “first step” and that it will come up with more explicit measures of risk.

"We hope to build on this index by attaching risk data, such as damage to property and health statistics, in order to understand the relationship between weather extremes and risk, enabling more explicit risk indices to be developed,” Grace said.