About the Australian Actuaries Climate Index

The Australian Actuaries Climate Index (AACI) has been developed to measure whether the frequency of extreme weather conditions is changing over time.  It is designed to help inform actuaries, public policymakers, companies and the general public about climate trends in Australia.

Actuaries are experienced in the assessment and management of the financial consequences of risks and in the summarisation and presentation of complex data  Many of the organisations that Actuaries support are concerned with climate risk and with how it will affect their business - for example general insurers, banks and investment managers.  The index is intended to provide a useful measure of how the extremes of weather are changing in order to support assessment of the change in risk.

The focus is on the extremes, which are related to risks such as inland and coastal flooding, cyclones, drought, and heat waves.  The indices are intended to add to our understanding of how certain risks may be changing as a result of climate change.  Graphics and downloadable data is available for those who wish to explore the Index.

The Index examines changes in the frequency and duration of extreme temperatures (high and low separately), heavy precipitation, drought, strong wind, and changes in sea level. The Index is available for 12 regions of Australia.

For each Index the time series begins in 1981.  The start dates for the wind indices are later, noting that the change in wind measurement devices (anemometers) contributed to a discontinuity in the data.   The wind indices start from the date of installation of new anemometers.  

The indices are based on measurements taken by the Bureau of Meteorology (BoM) from its extensive network of meteorological and coastal tide stations. All data is compared to measurements over the 30-year reference period of 1981 to 2010. The data is summarised by meteorological season (three months ending February, May, August, and November), and a five-year moving average was selected as the key metric.

The six components of the AACI are:

  • Frequency of daily maximum and minimum temperatures above the 99th percentile.
  • Frequency of daily maximum and minimum temperatures above the 1st percentile.
  • Frequency of rainfall over five consecutive days above the 99th percentile.
  • Seasonal maximum consecutive dry days.
  • Frequency of daily wind speed above the 99th percentile.
  • Seasonal maximum sea level.

The composite Index combines the measure of high temperature, rainfall and sea level into a single Index.

Results are produced for each season, such that autumn is compared to previous autumns, summer is compared to previous summers, etc.

The data is derived from individual weather station tide gauge data and available from the Bureau of Meteorology (BoM).  More specifically:

  • The temperature measures are based on the 112 ACORN-SAT stations.  This data has been homogenised by the BoM to ensure consistency over time.
  • The rainfall data is based on all weather stations across Australia that collect rainfall data (around 2,000 stations).
  • The wind data is based on 38 stations that are thought to provide the most reliable wind data, noting that wind measurement is inherently more uncertain.
  • The sea level data is based on 16 tide gauges around the country and are taken from the BoM’s Baseline Sea Level Monitoring Project.

In order to make the measures comparable, they are standardised using the mean and standard deviation of each measure over the reference period. We subtract the mean from the result and then divide through by the standard deviation. This ratio creates a standardised anomaly, which measures the statistical significance of the change over time relative to the underlying level of variability and importantly allows the different measures to be aggregated into a single Index.

To ensure that the Index is easy to understand, the AACI uses a simple aggregation method, and takes the simple average of each of the three component measures (once they have been standardised).

AACI = mean(HighTempstd + Precipstd + SeaLevelstd)

The Index is provided at quarterly time periods and updated on a quarterly basis.  The primary metric used is a five-year moving average, which smooths some of the volatility and weather cycle impacts from the measure.

More information is available in the Quick Guide.  A detailed description of the methodology behind the AACI is available in the Design Documentation.

The Index was formally launched at the Institute's General Insurance Seminar in November 2018. 

View Tim Andrews' presentation.

Tim discusses his plenary session on climate change and how actuaries can utilise the AACI to better inform their risk management framework.