Political agreement among Germany’s federal states—and at central government level—appears to be the missing ingredient in the debate about compulsory natural catastrophe cover in the country, according to a new commentary from AM Best.

The Best’s Commentary, “Political Consensus the Missing Ingredient for German Natural Catastrophe Solution,” notes that Germany is unusual among the major European economies in not having some form of natural catastrophe insurance scheme.

However, severe flooding in southern Germany in June 2024, has reignited calls for a state-backed system to provide comprehensive natural hazard insurance protection for damage caused by flooding, backwater, earthquakes or snow pressure (Elementarschadenversicherung).

Proposals for a solution to reduce the protection gap specifically caused by flooding have exposed some sharp divisions: between the insurance industry and politicians, and among (re)insurers themselves. AM Best believes there is sufficient capacity available, both from global reinsurers and the capital markets, to take on these exposures should a scheme eventually be introduced, even if it contains compulsory features.

To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=345086.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801191725/en/