Are We Gambling with Earth’s Future? Actuaries Sound the Alarm on Planetary Risk

A new report by actuaries at the University of Exeter, partnering with earth scientists, paints a stark picture: we are woefully underestimating the risks facing our planet.

This report, titled “Planetary Solvency,” argues that our current risk assessments, based primarily on the work of bodies like the IPCC and IPBES, are inadequate. They warn that the planet’s capacity to support our civilization is facing unprecedented threats from climate change and biodiversity loss.

The Limitations of Science Alone

While science is essential for understanding these threats, the actuaries highlight a crucial limitation: science’s focus on probability and likelihood doesn’t always translate well to managing truly catastrophic risks.

“Science is concerned with precise measurements and establishing underlying laws of nature,” the report states. “Science appropriately requires a lot of healthy scepticism and replication to achieve a high level of consensus within the scientific community. These are clearly important ways of understanding the world.”

However, science isn’t designed to effectively handle low-probability, high-impact events, which are exactly the kind of risks we face with climate change and biodiversity collapse.

The Actuarial Approach: Embracing Prudence

Actuaries, on the other hand, specialize in analyzing and managing risks, even those with uncertain probabilities. They build models that assess the worst-case scenarios and develop strategies to mitigate them.

The report compares the IPCC’s approach to climate change risk with the stringent risk tolerances of European insurance companies. These companies are required to ensure insolvency occurs no more than once in 200 years.

In contrast, the IPCC’s target of avoiding a 2-degree Celsius increase in global heating has a 50% chance of success—a level of risk deemed unacceptable for financial institutions.

Calling for Action: A Planetary Risk Assessment

The actuaries’ report isn’t about doom and gloom; it’s a call to action.

“The choice is simple: continue to be surprised by rapidly escalating and unexpected climate and nature-driven risks, or implement realistic Planetary Solvency risk assessments to build resilience and support ongoing prosperity,” the report urges.

The report recommends establishing an independent body to conduct annual planetary solvency assessments, increasing climate and ecological literacy among policymakers, and fostering a more integrated approach to risk management that considers the interconnectedness of economic, climate, ecological, and social systems.

A planetary solvency assessment conducted by the report authors paints a concerning picture. Currently, we operate outside the safe risk tolerance zone for all factors except the economy. By 2050, they project a dramatic decline in global GDP, 2 billion deaths, and widespread social and ecological collapse unless decisive action is taken.

Perhaps it’s time to heed the warnings of actuaries, professionals known for their conservative and risk-averse approach. The future of our planet might depend on it.

*Jack Santa Barbara, PhD, is a retired CEO, academic who lectured in sustainable business, and philanthropist, with a long standing interest in sustainability issues.