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Environmental risk solutions in China

Can compulsory liability insurance reduce environmental risk?

Environmental pollution

In the past, with China's extraordinary economic growth, some man-made pollution problems appeared in the face of the nation. For example, some private chemical enterprises which only pursued profits did not care about environmental protection and caused some environmental pollution incidents that aroused social concern.

The Chinese Government is alert to this issue and over the past five years has devoted significant energy and resource to ecological conservation. The nation has become more purposeful and active in pursuing green development and there has been a clear shift away from the tendency to neglect ecological and environmental protection. Whilst more needs to be done to resolve China’s water pollution problem, efforts to conserve resources have seen some encouraging progress, for example: the intensity of energy and resource consumption has reduced; major ecological conservation and restoration projects mean forest coverage has increased; and ecological and environmental governance has been significantly strengthened. China has become an important participant and contributor in the global endeavour for ‘ecological civilization’ that ensures harmony between humans and nature.

Case study by Mr Xiaoxuan (Sherwin) Li, FIA

Mr LiEnvironmental risk analysis is a frontier topic in the field of green finance, which is also the core issue of the G20 Green Finance Study Group (GFSG). The quantitative analysis of environmental risk and its pricing strategy are very important problems in the process of building an effective and sustainable green financial system.

The China Society for Finance and Banking is a member of the G20 Green Finance Study Group and it is promoting a ‘greening’ of the financial system by financing for sustainable growth and development. The Insurance Society of China is also focusing on the promotion of sustainable development and green insurance. At the beginning of 2017, these two organisations came together to undertake a quantitative analysis of environmental risk for the finance and insurance industry in China. In the project, the quantitative analysis of environmental risk for the insurance industry was led by the appointed actuary of China Re, Mr.Xiaoxuan (Sherwin) Li, FIA, and his actuarial team.

The project’s initial findings are that the externality of environmental risk is being borne by society, rather than the industries which cause and reap the financial rewards from behaviours that increase environmental risk. In other words the companies that are causing environmental pollution though their businesses practices are profiting because they do not have to internalise these costs themselves – instead the Chinese Government is having to raise revenue to clean up the environment in China. 

In the project, actuaries involved are using actuarial methodologies and catastrophe modelling methodologies to evaluate environmental risk. The ultimate aim is that this will lead to businesses having to internalise the cost of any environmental pollution caused by their operations. The models used by actuaries means they are able to measure an entity’s environmental risk and place a cost on that risk, depending on the potential probabilities and severities of environmental risk caused by the entity. This cost would then be recouped from entities via an insurance premium based on its behaviour related to taking environmental risk. This mechanism ensures that the costs of environmental pollution fall on the entity causing / benefitting from the pollution, rather than the society.

In June 2017, the Ministry of Environmental Protection of China and China Insurance Regulatory Commission released the exposure draft of the administrative measures for compulsory liability insurance of environmental pollution. With this mechanism, China hopes that its society and economy will continue on the path towards healthy and sustainable development.

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Events calendar

  • Your Actuarial Career: Managing Career Breaks

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    5 December 2019

    Spaces available

    Maternity or paternity leave, sabbaticals to study or travel, managing care responsibilities or escaping unemployment – Join Chika Aghadiuno and a panel of IFoA guests including Rachel Vecht, Women Ahead (International), Lee Faulkner, Financial Wellbeing Actuary, First Actuarial, Emily McGuire, Partner at Aon Hewitt, and Sarah Mathieson, Head of Research and Knowledge, IFoA, to ex

  • Sessional Meeting - Silent Cyber Assessment Framework

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    9 December 2019

    Spaces available

    The (re)insurance industry is faced with a growing risk related to the development of information technology (IT). This growth is creating an increasingly digitally interconnected world with more and more dependence being placed on IT systems to manage processes. Note: Registration is from 17.30 in time for the sessional to begin at 18.00.

  • CPD Member Event in Shanghai, China

    Function Room, F39, S1 Fuson Group, the Bund Finance Centre, No.600 Zhongshang East 2nd Road, Huangpu District, Shanghai Chinese address:BFC外滩国际金融金融中心,S1复星集团,39层报告厅,上海中山东二路600号
    9 December 2019

    Spaces available

    The IFoA’s President-elect Tan Suee Chieh will visit Shanghai. We will host CPD and Awards Presenting event on Monday 9 December 2019. The event is part of Mr Tan’s first presidential trip to China.

  • Professional Skills Training - London (10 December 2019)

    Staple Inn, High Holborn, London WC1V 7QJ  
    10 December 2019

    Spaces available

    This event will be of interest to students and recently qualified actuaries.

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020.  The content and discussion at this session is particularly tailored to actuarial students and newly qualified actuaries working in any area and the format is interactive, so you should come along prepared to take part in the discussions with your peers.

  • IFoA Joint Member Event with the Sunshine Insurance Group, Beijing China

    Room TBC, Kuntai International Plaza, No.12, Chaowai Street, Chaoyang District, Beijing 地址:会议室待定,北京市朝阳区朝外大街乙12号1号楼昆泰国际大厦
    12 December 2019

    Spaces available

    The IFoA’s President-elect Tan Suee Chieh will visit Beijing. We will co-host CPD and Awards Presenting event with the Sunshine Insurance Group on Thursday 12 December 2019. The event is part of Mr Tan’s first presidential trip to China.

  • ARC Sessional Research Event: Drivers of Mortality - Risk Factors and Inequality

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    6 January 2020

    Spaces available

    The authors will focus on a large dataset obtained from the UK’s Office for National Statistics (ONS) and related sources. Data are available at the level of Lower Super Output Areas (LSOAs) – small geographical areas with, typically, 1000-2000 residents and include death counts, exposures and a significant number of socio-economic variables including the index of multiple deprivation (IMD).

  • SIAS Event: My Journey to Data Science, Big Data and AI

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    7 January 2020

    Spaces available

    Patrick Lee is an actuary who has made the transition to working in software architecture and artificial intelligence (AI). He holds Microsoft Professional qualifications in Data Science, Big Data and AI and is currently working towards a DevOps (the automation of software testing and deployment) qualification. He is a member of the IFoA Council and is also President of the Wessex Actuarial Society. He is also a member of the IFoA and the RSS's joint Data Science Focus Group and will talk on the ethical use of AI. 

  • Spaces available

    This presentation covers the detail for how the matching adjustment is calculated. A small simple example spreadsheet is provided and discussed in detail.

    For actuaries wanting to get more involved with the matching adjustment, this is the opportunity to get a detailed description of the mechanics involved. This includes cashflows derisking, PRA tests as well as hypothecation.

    The presentation is provided by James Sharpe who has worked on a number of matching adjustment calculations with several firms.

  • IFoA Volunteer Recognition Reception

    Staple Inn, 4 High Holborn, Holborn, London WC1V 6DR, UK
    15 January 2020

    Spaces available

    As a thank you to all our Institute and Faculty of Actuaries (IFoA) volunteers, you are invited to join us at Staple Inn Hall, for an evening of drinks, canapes and networking, in London.

    IFoA President, John Taylor, will be attending and will make a speech

    If you support the IFoA as a volunteer (member or non-member), or in any other role, and you are going to be in London on 15 January, please book your place and join us at this reception.

     

  • Sessional Meeting - Operational Risk Dependencies

    Royal College of Physicians of Edinburgh 9 Queen St Edinburgh EH2 1JQ
    20 January 2020

    Spaces available

    The Operational Risk Working Party aims to assist actuaries and others in the modelling and management of operational risk. One of the key challenges in modelling operational risk is the modelling of dependencies between operational risks, and between operational and non-operational risks such as market, credit and insurance risk. Their paper seeks to assist in this regard, and help develop good practice in setting assumptions and modelling operational risk dependencies. 

  • KSS event in Glasgow: Public Sector Pensions

    Hymans Robertson, Glasgow 20 Waterloo St, Glasgow
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • KSS event in Stirling: Public Sector Pensions

    M&G Prudential, Stirling Craigforth Campus, Stirling
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • KSS event in Edinburgh: Public Sector Pensions

    Hymans Robertson 1, Exchange Place, Semple St, Edinburgh
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • ARC Sessional Research Event

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    3 February 2020

    Spaces available

    This sessional will be delivered by members of the research team working on the ARC “Big Health & Actuarial Data’ research programme, led by Professor Elena Kulinskaya (University of East Anglia).

  • Professional Skills Training - London (11 February 2020)

    Staple Inn, High Holborn, London WC1V 7QJ         
    11 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Sessional: Impact of E-cigarettes Working Party

    Royal College of Physicians, 9 Queen St, Edinburgh EH2 1JQ
    24 February 2020

    Spaces available

    This sessional meeting will be of direct interest to actuaries and others working in the in the Health and Care, Life or Pensions sectors or indeed actuaries with an interest in morbidity or mortality. Note: Registration is from 17.30 in time for the sessional to begin at 18.00.

  • Professional Skills Training - Edinburgh (25 February 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    25 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Spring Lecture 2020, Edinburgh - Vicky Pryce

    Assembly Rooms, 54 George St, Edinburgh EH2 2LR
    25 March 2020

    Spaces available

    What next in Economic Policy?

    Please join us on 25 March 2020 for our annual Spring Lecture presented by Vicky Pryce in Edinburgh. 

  • IFoA Asia Conference 2020, Kuala Lumpur

    CCEC Nexus, 7, Jalan Kerinchi, Bangsar South, 59200 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia
    24-25 June 2020
    Spaces available

    The sixth annual Asia Conference once again offers a prestigious line-up of home and international speakers discussing the insurance and financial industry’s innovation and change in Asia. This year's conference in Kuala Lumpur will be hosted by Tan Suee Chieh, IFoA’s first Asian President. He will also make his Presidential address at this conference and will expand on the important elements of IFoA’s new strategy. 

    Additionally, this landmark conference will showcase how the IFoA is reinventing itself to support its members to succeed and thrive in a digital age, within traditional businesses and beyond, as a global organisation. 

    Not to be missed by international industry players, opinion formers, academic and industry leaders, actuaries and non-actuaries.