Presentation name

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The 3rd Younger Members Convention
29-30 November 2004, The Chesford Grange Hotel,
Kenilworth
Can Actuaries Save the World?
Keith Lawrence Nautilus Consultants www.nautilus-c
onsultants.co.uk
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The solution?
University offers 'Swampy' degrees A Scottish
university is offering courses in how to be an
eco-warrior. Students will learn the arts of
environmental activism such as chaining
themselves to trees, digging tunnels and
launching campaigns. www.ananova.com
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Whats it all got to do with actuaries?
1. Impacts on insurance companies pension funds

e.g. climate change affects general insurance
claims
2. Actuarial skills and tools are relevant

• many environmental issues occur over the
  long-term, and are highly uncertain in nature

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1. Impacts on life insurance co.s pension funds

• CSR and brand

• Ethical investment trend
• Do greener companies perform better?

• Climate change

• Environmental liability insurance

• The image of the profession

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Case study Climate Change

• Average global temperature is already rising
• 20th century was probably the warmest in the last
  1,000 years

• Rainfall patterns are changing
• Sea levels are rising
• Glaciers are retreating
• Arctic sea-ice is thinning
• Extreme weather is more common in some areas

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Climate Change Its not all bad news

• Varies by sector
• e.g. warmer summers means more tourists???
• Some studies indicate overall economic benefit
  for USA
• Opportunities for those who adapt first
• Includes financial services sector
• The Carbon Trust

• Uncertain
• Possibility of extreme climate change?

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2. Actuarial skills and tools are relevant
My experience of moving from conventional
actuarial work into the environmental field
Long-term issues Uncertainty
a) Risk management b) Option value c) Portfolio
management
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a) Risk analysis management for projects (RAMP)
identify risks
Flood defences? Climate change?
analyse the likely consequences
identify mitigation strategies
control residual risks
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b) Option Value
The value of having an option open to you

• Cutting it down is irreversible you lose the
  tourism option
• Uncertainty over future value of timber / tourism
• Can modify the Black-Scholes model

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b) Portfolio Management
How to manage a portfolio of investments over
time, to meet an objective.
Objective Sustainable Development Economic and
social development that meets the needs of the
current generation without undermining the
ability of future generations to meet their own
needsThe Brundtland Commission, 1987

• Can think of 3 types of capital to manage
• Produced (conventional economic goods e.g. roads
  buildings)
• Natural (landscapes, ecosystems, habitats
  species)
• Human (a population who are healthy, educated,
  happy, )

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What can YOU do?

• Recycling
• Efficient energy use
• Be a thoughtful consumer
• Lobby for better environmental practices in the
  workplace

• IoAs Environmental Research Group(Chairman Nick
  Silver see IoA website)
• Think
• How do environmental issues affect my industry?
• Can we pre-empt these - first mover advantage?
• Have brilliant ideas that will save the world!

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Conclusions

• The world faces serious environmental issues
  climate change, pollution, unsustainable use of
  natural resources ...

• Actuarial skills and tools could be valuable
• Long-term issues, uncertainty

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Conclusion Can actuaries save the world?

• CAN take the lead in adapting to change
• and in assessing the impacts on your industry
• CAN apply actuarial skills and tools to some
  environmental issues

NO
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Thank you
Keith Lawrence Nautilus Consultants www.nautilus-c
onsultants.co.uk