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Climate Scenarios to Actuarial Assumptions: A Practitioner's Framework

Background and Purpose

Regulatory developments, for example, International Financial Reporting Standard (IFRS) S2, Climate-related Disclosures[1] and internal risk management frameworks, most notably within the Own Risk and Solvency Assessment (ORSA), require both qualitative and quantitative scenario analyses to ensure that insurers understand any material climate-related risks within their business such as flood, severe storm, wildfire, heatwaves and consequential disruption to financial and energy markets.

The Network for Greening the Financial System (NGFS) has emerged as the primary reference framework for climate scenario analysis in financial services, providing a structured set of scenarios that span both physical and transition risks. Other datasets such as IPCC/CMIP6/SSP-derived projections and IEA transition pathways provide additional granularity when required. All these frameworks produce a set of macro-financial and climate-related variables, e.g. unemployment rate, GDP growth, house prices, energy prices which may fundamentally deviate from current experience or traditional actuarial extrapolations of historical data.

Although the NGFS scenarios and supporting frameworks can provide valuable datasets, they are large and somewhat inaccessible. A significant methodological gap remains in blending these climate scenario outputs with traditional, experience-driven baseline assumptions. Actuaries need a robust roadmap to bridge this divide and measure the impact of climate risk in their core functions like product pricing, liability reserving, financial condition reporting and assessing solvency.

The SOA Research Institute is issuing this RFP to develop a robust, practical framework that will be able to serve as a resource for actuaries who need to derive credible product-level assumptions directly from the data provided by NGFS scenarios.

Research Objective

The SOA Catastrophe and Climate Strategic Research Program is seeking researchers to provide a practical "how-to" roadmap and quantitative framework of how actuaries could bridge the gap between NGFS climate scenario outputs and actuarial assumptions for liability and asset modelling. The research should demonstrate how actuaries could use a given scenario (e.g., NGFS Delayed Transition or NGFS Current Policies) to adjust a baseline set of assumptions, enabling them to quantitatively incorporate climate risk into the actuarial process.

Specifically, the SOA Catastrophe and Climate Strategic Research Program seeks researchers to:

  • Explain the taxonomy of scenario output variables for actuaries to reference. Provide an explanation of the different modules within climate scenarios, e.g., for NGFS scenarios Transition Risk, Physical Risk, Macro-economic, Energy, Land Use and Other (uncategorized) and how they can be structured for extraction.
  • Create a framework for translating these scenario output variables into specific actuarial assumptions. Apply that methodology to a scenario such as a NGFS scenario. For a given scenario output variable, state whether, why and to what extent that item impacts each actuarial assumption over the projection period, including (but not limited to):

Demographic Assumptions

  • Mortality Rates
  • Morbidity Rates
  • Persistency
  • Retirement behaviour

Operating Assumptions

  • Acquisition expenses
  • Maintenance expenses
  • Claim expenses
  • General inflation
  • Premium increases
  • New business levels

Economic & Market Assumptions

  • Taxation
  • Regulatory environment
  • Investment income by asset class
  • Asset values by asset class
  • Policyholder profit participation/bonus levels
  • Yield curve
  • Discount rate
  • FX rates
  • Reinsurance cost and availability

For example, one might expect the NGFS data item ‘Real personal disposable income’ to affect future persistency and retirement behavior.

  • Provide techniques for adjusting the baseline set of assumptions above based on values output from the scenario.
  • Address any limitations of the scenarios in setting assumptions for actuarial purposes. These might include a lack of tail events, biodiversity or nature-system failures, tipping points, and societal impacts such as climate-influenced migration.

Address any issue of deep uncertainty, i.e. where even the probability distributions of outcomes are unknown, in the models underlying the scenarios, and the resulting risk of spurious accuracy.

  • Where scenario outputs show smoothed results (e.g., annual GDP change and yield curve changes), the research should evaluate if this might mask volatile movements as the result of an acute event within a time period (e.g., sudden asset price shocks) that may have significant asset-liability matching risks and suggest ways to address such a weakness.
  • Include a practical case study by demonstrating the framework through a rigorous hypothetical application to a specific product line and purpose (e.g. solvency scenario assessment)
  • Reference the trajectory of the science around climate modelling. Give a summary of where it was derived and where it might change in the future, together with the implications of future change.
  • Address any differences in the approach when applying shorter-term scenarios, such as those issued by NGFS in May 2025 and under what circumstances these short-term scenarios may be more appropriate.

Proposal Requirements

To facilitate the evaluation of proposals, the following information should be submitted:

  • Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
  • An outline of the approach to be used (e.g. literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
  • A description of the expected deliverables and any supporting data, tools or other resources.
  • Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.

Please note that as a policy, the SOA Research Institute generally does not provide funding to cover academic institution overhead expenses.

As a guide for developing the project budget, please review the Historical Project Cost Guide (see Appendix)

  • A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The SOA Catastrophe and Climate Strategic Research Program is interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
  • Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.
  • Proposals must be no more than five pages in length exclusive of references and researcher bios.

Selection Process

The SOA Catastrophe and Climate Strategic Research Program will appoint a Project Oversight Group (POG) to oversee the project. The SOA Catastrophe and Climate Strategic Research Program is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the SOA Catastrophe and Climate Strategic Research Program will make the final recommendation, subject to Society of Actuaries Research Institute (SOA) leadership approval. An SOA staff research actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to Research-CC@soa.org.

Notification of Intent to Submit Proposal

If you intend to submit a proposal, please email written notification by [May 22, 2026] to Research-CC@soa.org.

Submission of Proposal

Please email your proposal to Research-CC@soa.org ; proposals must be received no later than [June 5, 2026]. It is anticipated that all proposers will be informed of the status of their proposal by the end [July 2026].

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries Research Institute and the researcher.

The Society of Actuaries Research Institute reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Society of Actuaries Research Institute also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries Research Institute plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The Society of Actuaries Research Institute may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the [Society of Actuaries/sponsoring entity] in publicizing or promoting the research and responding to media requests.

The Society of Actuaries may also choose to market and promote the research to members, candidates and other interested parties. You agree to perform promotional communication requested by the Society of Actuaries Research Institute, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.

Conflict of Interest

You agree to disclose any of your material business, financial and organizational interests and affiliations which are or may be construed to be reasonably related to the interest, activities and programs of the Society of Actuaries Research Institute.

Appendix

The cost ranges below are intended as a guide for budgeting project costs for proposals in response to SOA Research Institute Request for Proposals (RFP). Please note these figures span the 33rd to 66th percentiles for all projects as well as projects that involve a specific approach (lit review, survey, etc.). They are based on historical costs over several recent years. Expected costs for some RFPs may fall outside these ranges depending on the nature of the work and resources required for completion.

All Contracted Projects

This category includes all contracted projects that the Institute has undertaken within the last several years.

The 33rd-66th percentile project costs range is $25,000 - $50,000.

Literature Reviews

This category includes projects that involved only a literature review or the cost for the portion of a larger project that included a literature review.

The 33rd-66th percentile project costs range is $15,000 - $20,000.

Surveys

This category includes all projects that had a survey as their primary component.

The 33rd-66th percentile project costs range is $28,000 - $55,000.

[1] https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s2-climate-related-disclosures.pdf?bypass=on