Germany’s insurance industry has introduced a proposed natural catastrophe reinsurance vehicle called Elementar Re, intended to serve as a backdrop for primary insurers facing increasing losses associated with climate risk.The concept, which was released by the German Insurance Association (GDV), centers around pooling high-risk residential properties, and adding a state-supported layer of protection for extreme events.With the Elementar Re model, the GDV said insurers are for the first time, presenting a concrete proposal for how a nationwide safeguard system in Germany could be designed.According to the GDV, Elementar Re will rely on two private safeguards in the event of a claim, including its own reinsurance and a gradually built-up reserve fund.

Where the GDV states that Elementar Re will have its own reinsurance, it’s best to assume that this would be retrocession.Therefore, it is reasonable to assume that the risk pooling reinsurer could look towards the catastrophe bond market, or other forms of insurance-linked securities (ILS) and alternative capital sources, for some of its retro programs in the future.Moreover, these private sector layers would be supplemented by a state stop-loss mechanism that would activate only in extreme events when private reserves are nearly depleted.

The association explained that the state would act as a backstop, not a primary insurer, providing a targeted safety net for catastrophes exceeding €30 billion, remaining in line with the coalition’s market-complementing reinsurance approach.As per the GDV, the model is designed to operate within a broader natural catastrophe framework, where coverage becomes the default for any new policies, and a one-time switch for existing ones, both of which come with an opt-out option that also waives state aid.Importantly, the GDV clarified that its effectiveness will rely on strong prevention measures, binding building rules in catastrophe zones, mandatory risk assessments, and full transparency of local risks.

This approach aims to guarantee sustainable insurance, proactive risk management, and efficient limitation of possible damages.Jörg Asmussen, CEO of the German Insurance Association (GDV), commented: “Climate-related damages in Germany have increased fivefold since 1980.Our goal is a safeguard system that works permanently: fair for homeowners, stable for the market, and sustainable for the public sector.

With Elementar Re, we are introducing a key building block for this system.” Adding: “But it is also clear: insurance alone is not enough.Without consistent prevention, risks will continue to rise — and that threatens the entire system.” The association estimates that more than 400,000 residential buildings in Germany are in areas where fully risk-based premiums would be difficult to afford.However, under the Elementar Re design, these high-risk buildings would be pooled, enabling continued coverage even in challenging risk situations.

The GDV explained that primary insurers would be able to transfer policies for these properties into Elementar Re.Premiums for the scheme would be capped at a maximum level and scaled according to building size, with any remaining gap financed through a small, broadly distributed adjustment.Anja Käfer-Rohrbach, Deputy CEO of GDV, said: “With Elementar Re, we keep even the most exposed houses insurable and affordable — financed in solidarity, without distorting the market.”.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.