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The 3 rd Younger Members Convention. 29-30 November 2004, The Chesford Grange Hotel, Kenilworth. Can Actuaries Save the World?. Keith Lawrence Nautilus Consultants Laurie campbell photography. The solution?. “University offers 'Swampy' degrees

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The 3 rd younger members convention

The 3rd Younger Members Convention

29-30 November 2004, The Chesford Grange Hotel, Kenilworth

Can Actuaries Save the World?

Keith Lawrence

Nautilus Consultants

The solution
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.”

What s it all got to do with actuaries
What’s it all got to do with actuaries?

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

1. Impacts on insurance companies & pension funds

… e.g. climate change affects general insurance claims

2. Actuarial skills and tools are relevant

1 impacts on life insurance co s pension funds
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

Case study climate change
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

Climate change it s not all bad news
Climate Change: It’s 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?

2 actuarial skills and tools are relevant
2. Actuarial skills and tools are relevant

My experience of moving from conventional actuarial work into the environmental field

Long-term issues


a) Risk management

b) Option value

c) Portfolio management

A risk analysis management for projects ramp
a) Risk analysis & management for projects (RAMP)

identify risks

Flood defences?

Climate change?

analyse the likely consequences

identify mitigation strategies

control residual risks

B option value

Giant redwood forest



b) Option Value

The value of having an option open to you

  • Cutting it down isirreversible … you lose the tourism option

  • Uncertaintyover future value of timber / tourism

  • Can modify the Black-Scholes model

B portfolio management
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 needs”The 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, …)

What can you do
What can YOU do?

  • Recycling

  • Efficient energy use

  • Be a thoughtful consumer

  • Lobby for better environmental practices in the workplace

  • IoA’s 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!


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

  • These issues impact on your industry:

    • Climate change general insurance claims

    • Environmental liability insurance

    • Ethical investment

    • Image


  • Actuarial skills and tools could be valuable:

    • Long-term issues, uncertainty

Conclusion can actuaries save the world

CAN take the lead in adapting to change change, pollution, unsustainable use of natural resources ...

… and in assessing the impacts on your industry

CAN apply actuarial skills and tools to some environmental issues

Conclusion: Can actuaries save the world?


Thank you
Thank you change, pollution, unsustainable use of natural resources ...

  • Keith Lawrence

  • Nautilus Consultants