An integrated hydrodynamic-economic model for setting differentiated insurance premiums

The main purpose of this thesis is to develop a Risk Model that is able to set differentiated insurance premiums and calculate the required amount of capital if Delta Lloyd were to introduce flood insurance. Two problems arise during the development of such a Risk Model: (1) the estimation of the occurrence and corresponding extent of flood losses, (2) the possibility to set premiums for each customer or class of customers. These two problems are caused by the underlying nature of flood risk, a low probability high severity event. Nevertheless we succeeded to calculate differentiated flood insurance premiums which include the corresponding costs of capital required.