Individuals, businesses and financial institutions that invest in and insure climate-related risks may experience significant financial losses since extreme weather events have been proven to increase frequently. They started to develop climate-related stress tests and other risk management tools, hence creating a greater actuarial involvement. Climate scenario analysis by actuaries is needed to model the impact of climate-related changes and natural disasters. Besides, actuaries can quantify a company’s carbon footprint and analyze progress against targets for reduced emissions to align with global targets. The relationship between variables like precipitation and temperature can be studied using regression analysis to analyze and predict the future situations. Actuaries can make use of the data from tree rings, lake sediments, ice cores and other sources to carry out paleoclimate analysis which can study past climate patterns.

 

  The use of artificial intelligence (AI) and machine learning (ML) in banks and insurance companies will most likely increase to automate their business processes. Actuaries can help in developing some useful models in insurance, investment and credit risk management. For instance, the decision-making process can be smoothen when actuaries develop models to estimate the expected payout for various claim types. Actuaries can develop models that are able to predict the risk related to different policyholders precisely and identify some associated risk factors. In the investment field, developing ML models can help to forecast the performance of various investments as well as identify new investment opportunities. 

 

  Banks and insurers are especially open to cyberattacks due to the vast amount of sensitive personal and financial information they store. Actuaries can help these organizations by measuring and exploring risk management. Actuaries can recognise security needs, identify security threats, assess any weaknesses, quantify the threat and rank the necessary remedies. Besides, penetration testing could be carried out by evaluating an organization’s security through an authorized simulated attack, and might find possible weaknesses that would be exploited by actual attackers. Actuaries can estimate the likelihood and possible consequences of certain risks using numerical numbers. Organizations can better manage their cybersecurity risks by combining these strategies with others. Actuaries could also assist organizations in determining whether cybersecurity investments such as implementing new security technologies or purchasing cyber insurance are the most cost-effective.

 

  There will be numerous chances in the future for actuaries to have a greater impact on companies or sectors in which they have worked traditionally. Actuaries who can understand both the business side and the technology aspects of a problem soon will become essential for companies to save costs and stay competitive. 

 

Reference:

https://www.theactuarymagazine.org/the-future-of-actuarial-science/