Climate Change and Insurance - Dr. Vijay Manghnani
MCFAM (Minnesota Center for Financial and Actuarial Mathematics, UMN School of Mathematics) is pleased to announce the first in our 2020-21 MCFAM Distinguished Lecture Series. Please join us on October 8 at 5:30PM (CST) for a lecture by Dr. Vijay Manghnani. As an actuary, quant finance practitioner and meteorologist, he will speak on climate change and insurance.
Abstract:
Climate Change is one of the most significant and yet poorly understood risks faced by organizations today. While there is general consensus on the climate impact of continued greenhouse gas emissions, there remains significant uncertainty in the exact timing and severity of most serious extreme events. This uncertainty has led to a 'tragedy of the horizons' among much of the financial sector, where short term risks and financial decisions need to be balanced against long term secular risks introduced by climate change. The risks posed by climate change can be broadly classified into two categories, physical and transition risks. Physical risks refer to the increased direct exposure to changing frequency and severity of extreme events. Transition risks pertain to impacts on traditional business models and sectors as society shifts towards a lower carbon economy. A comprehensive analysis for these risks necessarily involves rigorous portfolio stress testing and scenario analysis on both the asset and liability side of the balance sheet. While climate change is a global phenomenon, the specific weather extremes are very local. The embedded correlations and non-linear impacts make financial outcome distributions skewed and fat tailed. The financial models used to assess climate change risk need to adequately reflect the complex spatio-temporal interactions between nature and physical/financial assets. The insurance industry, in its key role as a risk transfer intermediary is often at the forefront of the financial impacts of climate change. The industry is not a novice to dealing with climate risks emanating from extreme events, such as hurricanes, floods, wildfires, etc. In response to the significant earnings and capital impacts of such extreme events, the industry has evolved over the past 3 decades, a fairly robust toolkit to assess physical climate risks using sophisticated catastrophe risk models. We will discuss how these models can help assess physical climate risks in insurance portfolios and how a similar approach might be adapted for broader finance portfolios.
Roundtable:
As part of Dr. Manghnani's virtual visit to MCFAM, on October 9 at 9:00 AM (CST), he will be joined by a panel of distinguished experts from a variety of backgrounds for a virtual roundtable discussion on his topic. We invite you to attend.
We request that you register for these events so we can send you the Zoom invite for both events. Register Here.
Panelists:
Bob Litterman, Chairman of the Risk Committee, Kepos Capital LP; Chair of panel report to Federal Commodities Trading Commission " Managing Climate Risk in the Financial System"
David Stainforth, Professorial Research Fellow The Grantham Research Institute on Climate Change and the Environment London School of Economics
Doug Collins, Chair, Climate Change Committee, sponsoring body of Actuaries Climate Index (ACI)
Jessica Hellmann, Ecologist & climate scientist; Director and Ecolab Chair for Environmental Leadership, Institute on the Environment and Russell M. and Elizabeth M. Bennett Chair, Department of Ecology, Evolution and Behavior, University of Minnesota
