Edition

The Impact of Climate Change Risk on Retirement

Background and Purpose

News stories from this past year have included a steady stream of reporting about events associated with climate risk. Photos of devastation from this past summer’s wildfires, deaths caused by heat waves, and suffering from other severe weather events have made clear the far-reaching impact of these events. In addition, there is an increase in concern in longer term non-catastrophic changes (e.g., air quality, higher heat indices, etc.) that may impact such things as land use and health and well-being.

As more encounters with these events have occurred, it has become increasingly evident that retirees and those approaching retirement can be both directly and indirectly impacted in their aftermath. This impact may be felt across several broad areas including: retirement investments and the economy; housing; governmental/policy shifts; individual retirement planning and risk assessments, financial institution changes, and additional ill-health and mortality.

With these issues in mind, the Society of Actuaries (SOA) Research Institute’s Aging and Retirement, and Catastrophe and Climate Strategic Research Programs (“sponsors”) have partnered on this research effort to explore this topic from the perspectives of a variety of retirement system stakeholders. The result of this effort is intended to provide a useful resource for readers to become well-grounded on the issues surrounding the impact of climate risk on retirement and set the stage for future research.

Given both the immediate and long-term importance of this topic, the Institute is simultaneously issuing both a call for essays and request for research proposals. The dual objectives of this effort are to:

  1. Publish a collection of essays that represent a broad range of perspectives on these issues.
  2. Sponsor a research project that provides an in-depth and expanded view on a topic related to these issues.

The next section of this document describes sample topics of interest for both the call for essays and request for proposals.

Submission requirements for essays and proposals are described in the subsequent sections.

Research Objective

The sponsors are seeking researchers and essayists to explore the multifaceted impacts of climate risk on retirement. The desired deliverable is a resource that catalogues major related issues while providing current considerations and potential future dynamics.

The intended audience for this effort is actuaries and other retirement professionals.

The following are proposed categories and questions that may be addressed. It is important to note that it is not required or expected of researchers to try to address all of these topics. To maintain a reasonable scope, it is intended for researchers to be selective in which ones they cover.

In terms of time horizon, it is preferred that researchers address both current and future retiree considerations in the context of the applicable issues and questions. Although both forms of considerations are preferred, researchers are free to cover only one aspect. However, in either case, the proposal should clarify what will be covered.

Retirement Investments and Economy

  • Will current strategies for retirement investing need to change significantly to account for climate risk? To what extent have retirees already made some adjustments to their investment asset allocations and time horizons?
  • Will climate risk have an overall positive or negative impact on future retirement investments, or will it be mixed with both winners and losers?
  • What type of information is being collected and available for individuals, institutions, and governmental agencies to help assess risks and direct appropriate investing in this area?
  • To what extent are ESG (Environment, Social and Governance) disclosures useful for retirees in making investment decisions? How can such disclosures be enhanced or changed to make them more useful?
  • To what extent will future climate risk be already priced into the investment markets and minimize the effect on retiree portfolios?
  • If climate risk induces a new paradigm in the economy where lower growth is experienced for several decades as compared to the last few decades, how would retirees and retirement systems be impacted?

Housing

  • What impact does climate risk have on choice of location during retirement? Can housing be designed to reduce the impact of major climate events?
  • How important is it to consider housing investment as a part of the total retirement portfolio and to diversify? Does climate risk change the percentage of the portfolio that is prudent to invest in housing?
  • How does climate risk impact the cost of homeowners insurance, the ability to get insurance, the need for insurance, and what insurance is needed?
  • For those who may need to move to new locations as a result of a climate event, such as flooding or sea-level rise, what specific impacts might it have on retirees? How different will the impact be depending on whether the home value makes up most of their net worth vs others whose assets are more diversified?
  • How does lack of suitable home insurance for extreme events impact retirees vs other homeowners?
  • What special risks do retirees who have made housing modifications to support aging in place face?
  • What impact do such events have on retirees who are in assisted living facilities or nursing homes in high climate risk areas, or whose caregivers need to travel to the retiree’s place of residence?
  • How many households have been displaced and/or suffered severe asset losses due to damage to their homes in climate events?

Governmental/Policy Shifts

  • Will efforts to combat the impact of climate risk result in higher tax burdens for retirees?
  • Will more regulations become necessary and would any of these have a direct or indirect impact on retirees?
  • What impact would climate risk have on social security benefits if the wage base diminishes as a result of efforts to mitigate the risk?
  • What steps can the Federal or Local Governments take to help mitigate the financial risk that climate change may have on current and future retirees?

Individual Retirement Planning and Risks/Financial Institutions

  • Using the Aging and Retirement Strategic Research series of guides for managing retirement risks and decisions as background information, which risks are most impacted by any interaction with climate risk and which are minimal? What are important considerations in helping to manage any of these risks?
  • What steps, if any, have retirees taken so far to address these risks in planning? How would any steps taken so far be viewed by retirees vs insurance companies?
  • How are insurance companies reacting to climate risk as it could affect retirees and are new products being developed? What has been observed about retiree interest in new products and services?
  • What adaptation actions to help prevent ill-health or death from climate change hazards may be needed by those who are retired, e.g., with regards to excess heat or extreme precipitation?

Healthcare Considerations

  • What happens when healthcare is disrupted by an event? How do retirees obtain medical care, medications, and insurance coverage when local facilities and services are gone? Do Medicare Advantage plans cover them if they need to move out of their service area and network of medical professionals?

Again, the list above is not meant to be exhaustive but merely examples of proposed topics that may be researched.

Proposers should thoroughly describe the issues on which they intend to focus in their proposals.

Rules for Submission of Essays

Timeline

The deadline for submissions is June 23, 2023. Essays will be published as soon as possible in a formal collection later in the year.

Length and Instructions for Submission

Essays must be submitted in English with a desired length of between 500 to 2,500 words. There is no requirement for formal or extensive footnoting.

Essays that contain any overt political statements, commercial content, and other inappropriate material will not be accepted. Articles must comply with the SOA's antitrust guidelines.

Please submit your essay via e–mail to:

Barbara Scott, Sr. Research Administrator
Society of Actuaries
e–mail: bscott@soa.org

Awards

$5,000 in award money has been allocated for this call for essays. The review committee will select the leading essays and determine how to allocate the award money among them. Consideration will be given to creativity, originality and the extent to which an idea might help promote further thought in this area. In exchange for award money, selected authors will be required to assign all copyrights in their essays to the Society of Actuaries Research Institute.

Authors are ineligible for awards if an essay is based on an Institute-sponsored and funded research study conducted by the author. However, authors are welcome to submit such essays for publication consideration.

Publication and Presentation

Depending on how many essays are received and the range of the topic areas, a suitable format for electronic publication and dissemination will be selected. Essays may also be presented at an SOA meeting, webcast, or other professional development event.

In addition, other venues for publication or presentation of the ideas outside of the Institute will be considered. It is hoped that publication of the collected essays will further knowledge and stimulate discussion as well as promote future efforts in this area.

Rights Granted

Please understand that by submitting an essay for consideration, the essay author(s) is granting to the Society of Actuaries Research Institute an unlimited license to print or republish their essay, with proper attribution given to the author(s).

Questions

Please direct any questions regarding this Call for Essays to:

Steven Siegel, Sr. Research Actuary
Society of Actuaries Research Institute
e–mail: ssiegel@soa.org

Rules for Submission of Research Proposals

Proposal Requirements

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

  1. 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.
  2. 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.
  3. A description of the expected deliverables and any supporting data, tools or other resources.
  4. 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.
  5. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The sponsors are interested in completing this project in a timely manner. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
  6. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Selection Process

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

Questions

Any questions regarding this RFP should be directed to Steven Siegel, SOA Research Institute Sr. Research Actuary at ssiegel@soa.org or +1 847-706-3578.

Notification of Intent to submit Proposal

If you intend to submit a proposal, please email written notification by May 1, 2023 to Barbara Scott at bscott@soa.org.

Submission of Proposal

Please email your proposal to Barbara Scott at bscott@soa.org; proposals must be received no later than May 15, 2023.

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.