Listen to the actuaries if not the scientists

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While I still don’t understand why most Republicans continue to see science and scientists as the enemy, especially in the area of climate change, let me suggest that if you don’t want to hear what the scientists have to say, would you perhaps listen to the actuaries instead?

I’ve known a number of actuaries over the years, and I have done some study in actuarial statistics myself, and I can’t say that I have ever detected any overall liberal bias in the profession. Indeed, it seems to attract a pretty serious, no-nonsense conservative personality if anything. The focus is on the numbers, and usually on the business effects of those numbers, as insurance companies stake huge bets on the accuracy of actuarial statistics and employ the largest share of actuaries.

This is why I like to monitor the Actuaries Climate Index, which attempts to put some numbers to a “just the facts, ma’am” look at the extreme weather events that will likely impact future insurance claims. In short, if you don’t believe in climate change because you don’t trust the scientists, then for God’s sake, pay attention to the actuaries, or it may well cost you real money. The trend toward more extreme climate events is very real, and that reality has very tangible impacts on your investments if not anything else you care about.

What is the Actuaries Climate Index?

The ACI uses standard risk analysis techniques to monitor changes in five types of climate-related events:

  1. Frequency of extreme high temperatures (above the 90th percentile)
  2. Frequency of extreme low temperatures (below the 10th percentile)
  3. Frequency of high winds
  4. Maximum amount of heavy precipitation
  5. Longest period of consecutive dry days in the last 12 months
  6. Change in sea level

The counts of these climate-related occurrences over the years 1961 through 1990 were statistically combined and normalized to provide a base index reading of zero. Differences from this “norm” in more recent years are then measured in standard deviations from that norm (the Y axis in the graph above). Information is currently being reported for just the United States and Canada and, as can be seen in the graph above, the tallies of recent years have been running between one and two standard deviations above that norm. The statistical trend line has now exceeded one standard deviation from those base years.

In other words, a year that would have been in the top sixth of “bad years” in terms of these five factors in the 1961-1990 timeframe is now “the new normal.” [1] That’s not good, and it is likely only to get worse. If that statistical trend is not abated, then twenty years from now we will likely be saying that the worst sixth of years in this current time period would become the “new-new normal.” Let me suggest that, after experiencing the most recent hurricanes on the Gulf of Mexico coast and the wildfires in California, we are not preparing well for this “new-new normal.”

Reality apparently has a liberal bias

Former New York City major and billionaire Michael Bloomberg embraced a non-ideological “business risk” approach to climate change in 2015 in an attempt to more support on climate change issues from both sides of the political aisle. [2] His argument was that rational business people would spend lots of money to protect their investments against risks that are far less likely than climate change. But the ideology is strong on this one, and he has not made much of a dent in loyal Republican thinking as far as I can determine.

The major ideological obstacle (perhaps after religious literalism) seems to center around the idea that collective action must be taken to mitigate climate change risks. And “collective” is a dirty word in the Republican camp these days.

As a new registered voter in Florida, I am still coming to grips with the reality that, after a couple years of devastating weather and a summer of “red tides” and “green slime,” the voters of the state elected climate change-denying Republicans to the offices of Governor and U.S. Senator. Then again, rationality is never something to bet on in Florida.

Perhaps The Divine is in control after all. A friend once warned me against purchasing property in Florida saying, “God made Florida originally as a swamp, and God wants it back!”


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Notes:

  1. About 1/6th of a normal distribution (~16%) is located over one standard deviation above the mean:
    Standard Deviations
    Wikipedia
  2. McMahon, Jeff. “Michael Bloomberg To Tackle Climate Risks For Investors.” Forbes Magazine, 4 Dec. 2015.

1 thought on “Listen to the actuaries if not the scientists

  1. Bruce Lindgren

    As fate would have it, I’m reading a book at the moment titled “The Water Will Come” by Jeff Goodell (2017). It’s not actuarial, but it provides a historical look at changes in ocean levels and anticipates highly likely futures. Florida features prominently because so much of the state is close to sea level and because it has been affected and shaped by changes in sea levels in the past.

    The potential effects would be devastating, so there’s a lot to consider here.

    Reply

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