A Data-Driven Framework for Climate Index Construction: Evidence from a Weighted Actuaries Climate Index

Yavrum C., Kestel A. S., Garrido J.

7th European Actuarial Journal Conference, İstanbul, Türkiye, 9 - 11 Eylül 2026, ss.1-63, (Özet Bildiri)

  • Yayın Türü: Bildiri / Özet Bildiri
  • Basıldığı Şehir: İstanbul
  • Basıldığı Ülke: Türkiye
  • Sayfa Sayıları: ss.1-63
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

The Actuaries Climate Index (ACI) has recently emerged as a comprehensive tool for quantifying the impact of climate change by capturing extreme conditions in air temperature, precipitation, drought, wind, and sea-level rise across the United States and Canada. The index is constructed as the simple average of six standardized components, implicitly assigning equal importance to each. However, this equal-weighting assumption may be restrictive, particularly across heterogeneous regions and application domains, where the informational content and relevance of individual components can vary substantially.

This study proposes a data-driven framework for constructing a weighted version of the ACI that allows the relative importance of its components to vary across contexts. The resulting index is evaluated across multiple U.S. regions in two distinct application domains. By moving beyond the restrictive equal-weighting scheme, the proposed approach enables the index to adapt to region-specific climate dynamics and to the nature of the target variable under consideration. This provides a more flexible and informative representation of climate-related risk, highlighting that the optimal construction of composite climate indicators is inherently context-dependent.