Actuaries Climate Index™ Guided Tour

Guided Tour— What is the Actuaries Climate IndexTM? The Actuaries Climate IndexTM (ACI) is an index of climate risks not unlike the Consumer Price Index that monitors average price changes over time to a basket of standard goods and services. Actuaries measure and manage many types of risks: thus the Actuaries Climate IndexTM measures climate risks on the basis of a basket of extreme climate events and changes in sea level. Increasing values in the index point to increased occurrences of extreme climate events.

Guided Tour— What is unique about the Actuaries Climate IndexTM Guided Tour— What is unique about the Actuaries Climate IndexTM? (cont’d) The Actuaries Climate IndexTM does not explain the causes of climate change or project future changes. Its focus is on actual historical data from experience going back to 1961, collected by reliable sources. It offers in a neutral and factual way, an analytical context for exploring various impacts of recent changes in the climate focusing on perils in addition to increases in temperatures.

Guided Tour— What is unique about the Actuaries Climate IndexTM Guided Tour— What is unique about the Actuaries Climate IndexTM? (cont’d) The peril components have been chosen to capture variations in the key impacts of climate indicators and allow a deeper analysis of the effects, validate expectations and quantify the variances. Thus the user can get a customized view of how climate is being affected in Canada and the United States or in a particular region. Current data will be collected and loaded into the site each quarter. Regular visits to see if the Actuaries Climate IndexTM number, or a specific component, has gone up, down or stayed the same will keep you informed of potential changes in risks in your area or in regions of interest.

Guided Tour— Introduction This presentation provides a context to help you better understand what you will see on the Actuaries Climate Index (ACI) website and how to derive maximum value from using this tool. It offers preliminary information, definitions and answers to a few questions. Additional Frequently Asked Questions (FAQS) can be found on the website. It also offers suggestions as to how to organize your visit, taking into account your priorities and available time.

Guided Tour— What can you learn from the ACI? Climate should be defined over long periods since there are always short term fluctuations, but in more recent years, fluctuations have been more frequently up than down. The Actuaries Climate IndexTM methodology uses a 30-year reference period of 1961 to 1990, and over that period, the average index is zero. Color coded monthly or seasonal values display a quantified measure of changes in riskiness for the index and each of its six components.

Guided Tour— What can you learn from the index? (cont’d) The 5-year moving average, which smooths out the monthly and seasonal fluctuations, has slowly risen as we move away from 1990. The user can observe that climate risks have multiple impacts and these vary by region and component, allowing for informative comparisons and analyses.

Guided Tour— How are the Actuaries Climate IndexTM values calculated? The Actuaries Climate IndexTM is the sum of component values divided by the number of components (six), so each is given equal weight. Scrolling down the six screens will show the series of values for each component: Frequency of extreme warm temperatures Frequency of extreme cold temperatures Frequency of high winds Maximum amount of heavy rain Longest period of consecutive dry days in last 12 months Change in sea levels

Guided Tour— How are the index values calculated? (cont’d) “Extreme” refers generally to values that are in the 90th or 10th percentile. Values are measured as anomalies, which in the Actuaries Climate IndexTM context refers to the difference between a value in a given month or season and the value in the 1961-1990 reference period. More details are available in Component Definitions under the DATA drop-down menu.

Guided Tour— index values can be compared to the reference period

Guided Tour— Technical Illustration of the Standardization Process The calculation involves two steps: Step 1: Calculating the average for the month or the season and subtracting the mean calculated for the corresponding month or season over the 30-year reference period to measure the variance. Values for components are in different units: frequency, number of days, millimeters of rain, etc., therefore cannot be added directly. Standard deviations are a common measure of risk, so components values are converted to this measurement.

Guided Tour— Technical Illustration of the Standardization Process The calculation involves two steps: Step 2: Dividing the difference by the standard deviation from the reference period converts component values into standardized values that can be added together because they are expressed in a common unit of measurement: Units of Standard Deviation (SD). These values are referred to on the index website as standardized anomalies: the difference between the component value in the month or season at hand and its average value during the reference period, 1961-1990, divided by the standard deviation of that component’s values during the reference period for that month or season ((x - µ)/ σref).

Guided Tour— How are the screens organized? A typical screen relates to the Actuaries Climate IndexTM or a component for a region and shows the standardized monthly or seasonal values color coded plus a black continuous line for the 5-year running average. The top screen is for the aggregate selected and sub-screens display components or sub-regions. Click on one of the sub-screens and it enlarges and moves to the top.

Guided Tour— How are the screens organized? (cont’d) There are 15 screens displaying the Actuaries Climate IndexTM for 12 regions plus the contiguous US, Canada and both countries including Alaska. For each of them there is a series of six screens covering the components. Thus in total there are over 100 screens. They can be accessed by selecting Regional Graphs or Component Graphs under the EXPLORE menu and using the drop-down menus.

Guided Tour— Sample screen for USC with Actuaries Climate IndexTM and a few regions Note that the US and Canada Actuaries Climate IndexTM is not a weighted average of Canada and US indices. Standard deviations need to be calculated over the complete set of data for the location selected. The set of data for the US and Canada is larger than either the US or Canada and consequently generates lower standard deviations. A similar comment applies to a group of regions. A lower divisor results in higher standardized anomalies. Similarly, the index for Canada or the US are not the weighted average of their regions.

Guided Tour— Suggested exploration if this is your first visit Read first the following three short overview pages on the website: “About the Actuaries Climate Index” under the ABOUT drop-down menu, “Actuaries Climate Index At a Glance” under the EXPLORE drop-down menu, and “Executive Summary” using the link at the bottom of the At a Glance page. 2) Start with the USA & Canada and the aggregate index and then scroll down to compare the Contiguous US with Canada and the 12 regions by selecting Regional Graphs under the EXPLORE drop-down menu.

Guided Tour— Suggested exploration if this is your first visit (cont’d) Select Component Graphs also under the EXPLORE drop-down menu to look at components for USC. Use the Regional Graphs link under the EXPLORE drop-down menu to look at components for Canada or US or a particular region. If you select MAPS, you will see an animation of what has happened in all the regions, by season, since 1961. Once the animation ends, you can click on a region, and it will be outlined, as will the standard deviation in the Legend, for the latest season.

Guided Tour— Suggested exploration if this is your first visit (cont’d) 5) After a quick tour of regions or components you may be motivated to read explanations in other sections of the website or come back to specific screens. More detailed methodological information is available in the Development & Design document to be accessed from another link at the bottom of the first page under the ABOUT drop-down menu. Numerical examples are available in the Sample Calculations document under the ABOUT drop-down menu. It maybe useful to consult the Sample Calculations when you have a question about a particular component. Data can be downloaded for further analysis under the DATA drop-down menu. For details, see the Data Downloads.

Guided Tour— Suggested exploration if this is your first visit (cont’d) 6) Comments and suggestions are welcome at info@actuariesclimateindex.org If unexpected results appear, you can type the appropriate keyword in the SEARCH function in the upper right corner of the website which may direct you to a relevant extract or FAQ. You can also send an email to the address above.