Addressing climate change as the Head of Actuarial Function

Nuala Crimmins
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Climate change presents a significant and evolving risk to the (re)insurance sector, necessitating robust risk management frameworks and forward-looking strategies. The Head of Actuarial Function (HoAF) plays a pivotal role in navigating these challenges.

This article explores the responsibilities of the HoAF in the context of climate change, the requirements set by the Central Bank of Ireland (CBI), and the evolving landscape of climate-related risk management, including the latest guidance from the Institute and Faculty of Actuaries (IFoA).

Central Bank of Ireland Requirements

In March 2023, the CBI laid out clear guidelines for (re)insurers on managing climate change risks:

  • Iterative Integration: The CBI expects (re)insurers to gradually integrate climate change risks into their governance and risk management frameworks, treating them as key risks.
  • Double Materiality: (Re)insurers must consider how climate change impacts them and how they impact the climate (inside-out and outside-in perspectives).
  • Time Horizons: Climate risks should be assessed over short (0-10 years), medium (30 years), and long-term (80 years) periods, in line with EIOPA guidelines.
  • Local Adaptation of Group Policies: If group policies are used, they must be tailored for the local entity to ensure they’re relevant.

Responsibilities of the HoAF

The HoAF is integral to the Own Solvency Risk Assessment (ORSA) process in (re)insurance companies. Key responsibilities include:

  • Actuarial Opinions on Climate Risks: The HoAF must provide an actuarial opinion to the board on climate change risks, ensuring these are considered within the ORSA process. This involves both quantitative and qualitative assessments of the risks.
  • Risk Management Framework: They assess how well the (re)insurer’s risk management framework handles climate change risks, including evaluating the stress scenarios used.
  • Financial Projections and Technical Provisions: The HoAF checks if the financial projections and the calculations of technical provisions are appropriate, considering any uncertainties.
  • Stress and Scenario Testing: Reviewing the stress and scenario tests for climate risks is also part of their responsibilities, ensuring no significant limitations are overlooked.

HoAF's Considerations

The HoAF needs to handle various risks and time horizons in the ORSA process:

  • Comprehensive Risk Coverage: They need to consider both physical risks (like floods) and transitional risks (like regulatory changes).
  • Scenario Analysis: Conducting detailed scenario analyses to understand the financial impacts of climate risks over different timeframes is essential.
  • Risk Driver Understanding: Climate change should be seen as a risk driver and integrated into existing risk scenarios.

Recent Changes and Developments

Significant shifts have occurred in the approach to climate change risk management:

  • Climate Litigation Trends: There's an increase in climate-related litigation, pushing for greater accountability. Governments and fossil fuel companies are facing more legal scrutiny.
  • CBI Guidance Updates: The CBI's 2023 guidelines emphasise a structured approach to managing climate change risks, aligning with EIOPA standards. The latest CBI newsletter also highlights the importance of incorporating double materiality into risk assessments, ensuring that both the impacts on and from the insurer are considered comprehensively.
  • IFoA Risk Alert: The IFoA issued a risk alert in June 2024, stressing the importance of considering and communicating climate change impacts. This alert builds on previous guidance and underscores the need for robust scenario analysis.
  • Governance and Responsibilities: The CBI expects climate risk management to be integrated into the governance framework, with clear responsibilities for the board and senior management.
  • Materiality Assessment: A robust materiality assessment is required to identify (re)insurers' exposure to climate risks, considering both current and future scenarios.
  • Embedding Climate Risk into Business Practices: (Re)insurers need to operationalise climate risk strategies into daily activities, aligning policies, underwriting, pricing, and investment strategies.
  • Data and Modelling Enhancements: Improving data availability and modelling capabilities is crucial for better managing climate risks.


Managing climate change risks is a complex and essential task for the HoAF. By providing informed opinions, assessing frameworks, and ensuring robust scenario testing, the HoAF helps (re)insurers prepare for the evolving climate landscape.

Following CBI guidelines and the latest IFoA risk alert, and adopting an integrated approach to risk management, will be key to effectively navigating these challenges. This comprehensive strategy not only secures the financial stability of (re)insurance companies but also contributes to a sustainable, climate-resilient economy.

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