By Kim Ferrero
Assistant Director of Research
May marks National Wildfire Awareness Month, and June 1 will bring the official start of the Atlantic hurricane season. These back-to-back seasonal markers highlight a reality that actuaries understand all too well—the frequency, severity, and compounding nature of extreme weather events are shifting. It is important to continue analyzing weather data to foster discussions about the impact of extreme weather events on our lives, and our tools for measuring these risks should evolve accordingly.
For nearly a decade, the Actuaries Climate Index (ACI) has served as an objective, data-driven monitoring tool to track these changes. Developed through a collaboration among four major North American actuarial organizations—the American Academy of Actuaries, the Society of Actuaries (SOA), the Casualty Actuarial Society (CAS), and the Canadian Institute of Actuaries (CIA)—the ACI measures changes in extreme weather event frequencies and sea level rise relative to historical benchmarks across North America.
But as climate risks grow more complex, the data infrastructure supporting our profession must also step forward. That is why the research teams across our organizations are working to develop “ACI 2.0.” A foundational element of this upgrade is a critical methodology shift—transitioning the underlying data engine from traditional, localized weather station data to a newer, more advanced climate reanalysis dataset.
Driving Sound Policy and Insurance Decisions
The evolution of climate data is not just an academic exercise; it has profound implications for public policy and the insurance ecosystem. As we enter a period framed by immediate wildfire threats and impending tropical systems, decision-makers require transparent, reliable metrics to navigate growing financial and societal vulnerabilities.
When extreme weather events escalate, their impacts are felt across multiple policy domains:
- Insurance Availability and Affordability: Accurate, transparent data is foundational to robust catastrophe modeling and equitable ratemaking. Without it, standard insurance markets can become strained, leading to coverage gaps and an over-reliance on state-backed residual markets.
- Community Mitigation and Preparedness: Data from the ACI can help state, local, and federal decision makers justify investments in resilient infrastructure, stricter building codes, and targeted land-use planning. Knowing precisely how weather distributions are shifting enables proactive loss prevention rather than reactive disaster response.
- Cross-Practice Preparedness: While property and casualty lines face the most direct impacts from wind, flood, and wildfire, these perils also trigger significant public health strains and mortality fluctuations, directly affecting health and life insurers.
Why Newer Data Collection and Analysis Methods Matter to Actuaries
Historically, the ACI has relied on a trans-continental network of physical weather stations to gauge temperature, precipitation, and wind extremes. Its dashboard provides objective, regional climate metrics across 12 distinct regions in the United States and Canada, reflecting state- and province-level trends with seasonal data spanning back to 1961. To generate these insights, the index relies on a historical weather station grid resolution of 2.5 degrees latitude by 2.5 degrees longitude (roughly 170 miles by 170 miles at mid-latitudes).
While invaluable, weather station data introduces inherent challenges, including geographical gaps, reporting delays, and localized anomalies. The current macro-level grid has been highly effective for identifying broad continental shifts over the last six decades, but localized climate risks may fall through the cracks.
By shifting to a new model called ERA5 Reanalysis, which was produced by the European Centre for Medium-Range Weather Forecasts (ECMWF) and stands for “fifth generation ECMWF atmospheric reanalysis,” the updated index will utilize comprehensive climate assessment. While the ECMWF is based in Europe as part of a collaboration with the United Nations and NATO among other groups, it relies on cooperation from 57 countries to provide global climate data in an improvement over the previous data set.
ERA5 additionally provides a more sophisticated array of physical metrics that improve modeling and risk analysis. For instance, rather than simply counting consecutive dry days to infer drought, the reanalysis dataset tracks variables like soil moisture across multiple specific ground depths, giving actuaries a more comprehensive and predictive view of agricultural stress and wildfire vulnerability.
ERA5 combines historical observations with advanced data assimilation and meteorological modeling to create a seamless, hourly, high-resolution grid of atmospheric conditions spanning back decades. Additionally, the ERA5 data improves data collection precision by utilizing a hyper-refined grid of approximately 0.25 degrees (roughly 17 miles by 17 miles). This dramatically increases spatial resolution by a factor of 100, catching micro-climatic variations, steep terrain shifts, and local coastal dynamics with improved accuracy.
Keeping up with newer climate data offers benefits to actuaries’ fields of practice:
- Enhanced Spatial Coverage: It eliminates data blind spots, ensuring that unmonitored or rural areas that are highly susceptible to wildfires or inland hurricane flooding are accurately represented.
- Consistency and Continuity: It mitigates the risk of weather station closures or missing data points, ensuring a stable, uninterrupted baseline for long-term risk modeling.
- Greater Precision: Finer resolution allows for a more granular understanding of regional climate anomalies, driving better insights for property/casualty, life, and health actuarial practices.
The Takeaway
Advanced planning helps individuals safeguard their properties, but forward-looking data integration is what allows public policy to maximize long-term systemic readiness. As the Academy, alongside our partners at the SOA, CAS, and CIA, work toward the launch of ACI 2.0, we remain committed to providing the objective, rigorous metrics needed to manage climate risks. The current Climate Index remains a gold-standard benchmark for identifying long-term climate trends across North America and the Academy encourages actuaries, public officials, and the public to explore the existing data, utilize its unique historical insights, and join us in tracking the shifting extreme weather patterns that shape our future.
To learn more about the current index components, regional data downloads, and the science behind the measurements, visit the Actuaries Climate Index landing page.