Preface:

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In our daily lives, we frequently encounter situations where we must make choices. During the decision-making process, we often contemplate the potential rewards and opportunities that lie ahead. We ask ourselves, what is the incentive? However, it is important to acknowledge that choices also come with inherent risks. We must consider the potential negative outcomes. What are the potential consequences that I might face? As we navigate through these choices and decisions, we carefully evaluate the risks and opportunities involved. We strive to strike a balance, ensuring that we do not take on excessive risk that outweighs the potential reward. As an actuary, my role entails assisting banks and insurers in making informed financial decisions. I analyze the risks and opportunities that they face. For instance, insurers assume a certain level of risk by providing coverage for potential damages to your house. In return, they receive the reward in the form of premiums that you pay them. Similarly, banks charge a small amount of interest on your home loan, taking on the risk that you may encounter difficulties in repaying them. Therefore, a moderate level of risk is beneficial for both banks and insurers. As an actuary, I am responsible for helping them assess and maintain this delicate balance.


Climate Changes:


However, my specialization also extends to the field of climate change. I work closely with banks and insurers to help them comprehend the implications of climate change on their operations. This involves understanding how climate change affects the risks they face and the rewards they can expect. It is evident that climate change poses significant risks, not only to our survival as a species but also to the financial sector.

Uncontrolled climate change leads to a rise in natural disasters such as bushfires, heatwaves, and floods. The scientific consensus is clear: greenhouse gas emissions and increasing temperatures are directly responsible for these disasters. We have witnessed devastating events like the floods in LISMO this year and the bushfires of 2020, which engulfed our world in flames. As these disasters become more frequent and severe, insurers will face higher costs, resulting in increased premiums for individuals living in areas prone to such calamities.

If insurance premiums become unaffordable due to these escalating risks, it becomes a problem for both the insured individuals and the insurers themselves. Insurers do not possess a magical solution to prevent cyclones or bushfires from occurring. Similarly, banks also face financial consequences when homeowners are unable to afford insurance and subsequently struggle to repay their home loans in the aftermath of a cyclone or other natural disasters.
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In summary, my role as an actuary involves not only assessing the risks and rewards for banks and insurers but also helping them navigate the challenges posed by climate change. By understanding the potential consequences and adapting their strategies accordingly, banks and insurers can mitigate the financial impacts of climate change and ensure the sustainability of their operations.


Financial Risk:


Banks have expressed concerns regarding home loans for individuals employed in industries that are expected to shut down as part of our efforts to reduce emissions. Additionally, they are worried about the impact of climate change on agriculture and farming. Banks provide significant financial support to farmers, who heavily rely on this funding. However, with the increasing occurrence of droughts, bushfires, the expansion of tropical regions, and the introduction of new diseases and pests into Australia, there is a potential for crop failures and food shortages. Australian regulators are already apprehensive about these issues and fear that our financial system may not be able to withstand such challenges.

 Consequently, they have requested major banks to conduct tests to assess their vulnerability to climate-related impacts. This concern is not limited to Australia alone; European banks have also conducted a similar study and have reached the alarming conclusion that they are ill-prepared for climate risks. It is important to recognize that climate risk extends beyond environmental implications and poses financial risks as well. Furthermore, climate change will not affect everyone equally. Vulnerable individuals, such as the elderly, children, those with lower incomes, and those lacking economic opportunities, often reside in vulnerable housing, particularly in floodplains and areas prone to bushfires. As an actuary, my analysis confirms that these vulnerable populations will be disproportionately affected by climate change. 

Therefore, climate change poses not only environmental and financial risks but also social risks for our society. Undoubtedly, this reality can be disheartening, and it is a personal struggle for me to continue working on this issue. It becomes even more disconcerting when certain banks and insurers continue to support and finance fossil fuels, despite the fact that these actions will ultimately increase their own financial risks. By prioritizing short-term profits, they inadvertently contribute to higher insurance premiums and exacerbate the challenges we face.
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Three Time Profitable: 


It's a triple victory.
Financial institutions can also provide assistance.
If your residence is located in a disaster-prone area or is at risk of cyclones and floods, they can offer you additional funds to safeguard your property.
This includes measures such as reinforcing your roofs to prevent them from being blown away during cyclones.
This benefits your home, the bank, and yourself.
A triple triumph.
And what about reducing emissions?
Banks can invest in innovative technologies that have the potential to significantly decrease emissions, such as large-scale renewable energy projects. Additionally, they can provide homeowners with low-interest loans to install solar panels on their roofs.
Did you know that insurance companies cover half of all car repairs?
This presents insurers with a significant opportunity to influence the construction and repair of vehicles in a more sustainable manner.
One example is the utilization of recycled car parts.
This would not only reduce emissions associated with manufacturing and repairing cars but also potentially lower costs.
Making insurance more affordable would be advantageous for insurance buyers, insurers, and the environment.

How many of you have a large battery in your car or home?
In the near future, we will all rely on at least two batteries and will want insurance coverage for them, as we would require prompt repairs in case of any malfunctions.
Insurers and their actuaries are already exploring ways to offer this type of insurance. Moreover, there are various technologies that we will need in the future, and insurers can contribute by providing coverage for these advancements, such as offshore wind farms.
However, there is still much work to be done.
You have the power to make a difference.
You can inquire with your bank about their approach to climate change.
You can ask your insurer if they continue to invest in companies that contribute to worsening fossil fuel emissions.
You can transfer your funds to banks and insurers that are investing in the future of Australia.
This is an opportunity for you, as well as a significant opportunity for banks and insurers.

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