Australian Actuaries Climate Index Update

The Australian Actuaries Climate Index (AACI), commissioned by the Actuaries Institute, has been updated to include the data for Winter and Spring 2018.

At an aggregate level, the Index shows the frequency of extreme weather conditions across Australia as a whole remain elevated and above historical levels.

The Index is also available by specific weather component and at a region level. Looking at this breakdown, Tim Andrews, Principal at Finity Consulting, who led the team that collated the Index on behalf of the Actuaries Institute, notes the key points of interest from this update are the higher frequency of hot days in some parts of Australia and distinct signs of drought elsewhere.

In particular, in the Monsoonal North and Wet Tropics there was a very high level of extremely hot days in both Winter and Spring 2018. In the Central Slopes and East Coast (South) there were a high number of consecutive dry days in Winter 2018, a distinct sign of drought. Also, in parts of southern Australia, including the Murray Basin and parts of the Southern and South Western Flatlands, there were fewer days of extremely heavy rainfall in Winter 2018.

The Index was launched at last year’s General Insurance Seminar. It provides an objective measure of extreme weather conditions and sea levels across Australia and how these vary over time. It is collated two months after the end of each season following the release of data by the Bureau of Meteorology. Each season is compared to the same season in previous years, back to 1980, which shows how the extremes are trending over the long term. The reference period, or baseline, for the Index is 1981 to 2010.

The Index shows changes in the frequency of extreme high and low temperatures, heavy precipitation, dry days, strong wind and changes in sea levels. These components have a strong correlation to risk, an area of expertise for actuaries.

As noted by Actuaries Institute Chief Executive Elayne Grace, the Australian Actuaries Climate Index was designed to show Australia’s policymakers and business leaders how the frequency of extremes, and hence risk, is changing,

Extremes pose the greatest risks, in terms of the impact on people and businesses and, potentially, the greatest cost to the economy.

It is evident from recent commentary that Australia’s regulators, including the Reserve Bank of Australia and Australian Prudential Regulation Authority, are keenly alert to the potential impact of climate change and expect business to be reporting against the risks.

In the Actuaries Institute’s recent media release Tim Andrews warned that the next update will capture data that reflects Australia’s horror summer of floods, fires and wildlife devastation and recent events such as the floods in Townsville, the bushfires in Tasmania, and the fish die-offs in the Murray Darling Basin illustrate the impact that extreme weather conditions can have in Australia.

The Australian Actuaries Climate Index was built following the establishment of a similar tool for Canada and the United States, supported by a number of actuarial groups including the American Academy of Actuaries and the Society of Actuaries.

For further information, including interactive graphs, visit the AACI website.

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