The Australian Actuaries Climate Index, updated for the first time since its launch in late 2018, shows that the number of extreme hot days was above historical levels in both winter and spring 2018, and that portions of Australia remained extraordinarily dry showing distinct signs of drought.

The Index provides an objective measure of extreme weather conditions and sea levels across Australia and how these vary over time. It is collated two months after the end of each season following the release of data by the Bureau of Meteorology.

The Index shows changes in the frequency (rate of occurrence) of extreme high and low temperatures, heavy precipitation, dry days, strong wind and changes in sea levels. These components have a strong correlation to risk, an area of expertise for actuaries. Extremes pose the greatest risks, in terms of the impact on people and businesses and, potentially, the greatest cost to the economy.

Actuaries Institute chief executive Elayne Grace said, “Based on the readings, we recognise that climate change is expected to have major environmental, economic and social impacts, and it poses a serious risk to the industries that actuaries advise.

“We estimate annual natural peril cost to Australia of A$11bn ($7.8bn) to A$12bn, of which only 40% is insured. This figure includes public assets and the cost of intangible losses, such as mental health and family breakdowns, as a result of natural disasters.”

Although the six months were relatively benign overall, the Australian Actuaries Climate Index shows that the frequency of hot days in winter and spring was above historical levels, said Mr Tim Andrews, a Principal at Finity Consulting and the lead author of the index. The reference period, or baseline, for the index is 1981 to 2010. The index also continues to show decreased winter rainfall in a number of the southern regions.

Risk

Ms Grace said over time, the Index will help businesses better assess how weather extremes translate into financial risk.

She said Australia’s regulators are already calling for greater risk disclosure from businesses. In February, Australian Prudential Regulation Authority executive board member Geoff Summerhayes told a conference, “regulators' current stance of merely encouraging climate risk disclosure will inevitably harden towards making such disclosure mandatory”.