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Flood Insurance and Risk Management (FIRM)

Climate change is rapidly altering the risks that flooding and extreme rainfall pose to society. FIRM brings together expertise in water management and finance, with the primary aim of improving analyses of water-related climate risks and making them accessible to the financial sector, particularly for insurance applications.
Impact and collaboration

Realistic risk information enables both sectors to make well-informed decisions on risk sharing, financing and prevention in the face of rapidly changing climate risks. FIRM helps:

  • Insurers and banks to better incorporate flood risks, climate impacts and potential adaptation measures into their operations. This includes insurance premiums, insurance products, financing and capital buffers. Improved models provide a stronger evidence base for these decisions and offer clearer insight into which measures can reduce damage. The underlying hypothesis is that this knowledge can contribute to more appropriate insurance premiums and lower capital requirements.
  • Research institutions and organisations in the water sector to enhance the accessibility and applicability of existing data on flood probabilities and flood damage. FIRM aims to develop knowledge, methodologies and assumptions transparently and to share them as broadly as possible. This enables other researchers and societal stakeholders to evaluate, improve and apply the analyses to new research questions, applications and services.
  • Society as a whole by making reliable risk information publicly available. This information supports well-informed decisions on risk sharing, financing and prevention that contribute to financial stability and strengthen confidence in financial and public decision-making.

Research pillars

FIRM focuses on 4 research pillars. Together, these advance the understanding of climate risks and their implications for insurability, prevention and financial decision-making.

  • 1. Improving the modelling of flood and extreme rainfall risks

    FIRM improves risk analyses for dyke breaches and extreme rainfall, enabling insurers and banks to make better use of them. The centre examines, among other things, the residual strength of flood defences, the functioning of water systems, emergency measures and scenarios involving simultaneous dyke breaches.

    For rainfall-related risks, FIRM investigates the use of radar data and climate stress-test data to improve understanding of the spatial extent of rainfall events. By combining these datasets with rainfall statistics, information on land subsidence and data on, for example, groundwater management, more robust risk assessments can be developed for the financial sector. This prevents risks from being overestimated, underestimated, or assessed too conservatively in financial applications.

  • 2. Economic and financial impacts

    FIRM investigates how different climate adaptation strategies—such as flood protection, climate-adaptive construction and adaptive spatial planning—affect the economy and the financial sector. Decisions concerning spatial transitions and adjustments to water management in response to climate change may influence insurance premiums, capital requirements, investment decisions and the distribution of wealth. These effects, in turn, influence broader economic development.

    By analysing these interactions, FIRM helps policymakers and financial institutions assess adaptation measures over the longer term.

  • 3. Extreme events and insurability

    Rare events can cause extensive damage but are only sparsely represented in existing datasets. FIRM investigates how AI can help generate missing extreme scenarios and translate existing scenarios to future climate conditions. In addition, FIRM develops methods to assess the long-term insurability of different areas. This involves examining not only the probability and magnitude of damage, but also prevention measures, risk diversification, concentrations of losses, and the respective roles of public and private actors.

  • 4. Damage assessment, early warning and building back better

    Data from actual flood events show that existing damage functions are not always sufficiently accurate. FIRM improves these models using data from real-world events, enabling the relationship between flooding and expected damage to be estimated more precisely.

    FIRM also investigates the impact of early warning systems and building back better—a recovery strategy in which buildings and areas are rebuilt to be less vulnerable to future events. This provides clearer insight into which measures can reduce damage and improve long-term insurability.

Team

Bas Kolen is Professor by Special Appointment of Enterprise Risk Management, Amsterdam School of Economics

Inez Zwetsloot is Associate Professor in Business Analytics, Amsterdam Business School

Alwin Peters is Data Engineer and  Data Scientist at Nationale-Nederlanden

Founding partners

FIRM is a joint initiative of UvA Economics and Business and Nationale-Nederlanden Non-life Insurance. The research is supported by funding from TKI Delta Technology.

The collaboration enables research that is both academically relevant and socially applicable. Research findings, methodologies and other relevant outputs are made available to the wider financial and insurance sectors.

The FIRM ecosystem

The FIRM ecosystem brings together expertise and experience from academia, the financial sector, the water sector and government. Each partner contributes its own specialist knowledge to research that addresses pressing societal and professional challenges.

Financial sector: ING, Achmea, a.s.r., Zurich and Aon

Water sector: HKV, Witteveen+Bos and Deltares

Impact partners: Ministry of Infrastructure and Water Management, Dutch Association of Insurers, STOWA, VNAB, NL AAA Climate Resilient and DigiShape

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