“Climate damage has increased fivefold in Germany since 1980. Our goal is a security system that works over the long term: fair for homeowners, stable for the market and sustainable for the public sector. With Elementar Re, we are presenting a central building block for this system,” says Jörg Asmussen, General Manager of the General Association of the German Insurance Industry (GDV). “But it is also clear that insurance alone is not enough. Without consistent prevention, the risks will continue to increase – and that endangers the entire system.”
The model’s starting point are two core questions: How does protection against natural hazards remain insurable and affordable in the long term? And how can risk sharing with the state work in the event of extreme natural disasters? The coalition agreement sets important guidelines for this. With the “Elementar Re” model, insurers are now presenting a proposal for the first time as to how a security system for Germany could be designed. The proposal is intended as a professional impulse for political and social discussion.
Elementar Re bundles high-risk buildings and keeps protection affordable
More than 400,000 residential buildings in Germany are located in areas where risk-appropriate premiums would be difficult to afford. Elementar Re bundles these high-risk buildings and thus continues to provide insurance coverage even in more demanding risk situations.
The primary insurers can pass on the insurance contracts for these houses to Elementar Re. The premiums are capped at an upper limit, which are to be staggered depending on the size of the insured building. The difference can be financed through a small, widely distributed compensation. Many pay very little so that a few do not have to pay an unaffordable amount.
“With Elementar Re, we keep even the most vulnerable houses insurable and affordable – financed in solidarity, without distorting the market,” says Anja Käfer-Rohrbach, deputy general manager of GDV.
Government stop loss as a last resort
In the event of a claim, Elementar Re has two private-sector security levels: its own reinsurance and a security fund that is gradually built up. These are supplemented by a government stop-loss mechanism, which only takes effect in rare extreme events – i.e. only when private sector reserves have been largely exhausted. The state therefore takes on the role of neither a primary insurer nor a permanent reinsurer. Rather, the approach follows the idea of a state-supported reinsurance solution anchored in the coalition agreement that meaningfully complements the market without replacing it. This clearly defined mechanism forms a targeted protective anchor for exceptionally serious disasters with a loss volume of more than 30 billion euros.
Prevention and natural hazard insurance with an opt-out as a basis
The coalition agreement also aims to ensure that natural hazard insurance is as comprehensive as possible. The insurance industry is taking up this political impulse: elementary protection is becoming the rule – but no one is forced to take out insurance. The protection should be included automatically in new business; in existing business, a one-off, legally regulated change will take place up to a deadline. In both cases there is an opt-out option. Anyone who uses this also declares that they will not seek government help in the event of damage. From the insurer’s point of view, such an implementation significantly increases insurance density, but still preserves contractual freedom and avoids the disadvantages of a mandatory insurance solution.
Comprehensive and sustainable natural hazard insurance is only possible under the condition that effective preventive measures are consistently implemented. They form the indispensable basis for the overall concept. These include binding regulations for building in hazardous areas, mandatory risk assessments for new buildings and maximum transparency about local risks, for example through a nationwide natural hazards portal and a statutory natural hazards certificate for buildings. Only if risks are identified early on and taken into account structurally can insurance coverage be offered in a viable manner and damage can be effectively limited.
In summary: Elementar Re can only develop its impact as part of an overall natural hazards concept – with broad insurance protection against natural hazards as well as consistent prevention and adaptation to climate impacts.
