In a move that illustrates the growing concern of the insurance industry with the intensifying effects of climate change, Germany’s insurers have unveiled a comprehensive model designed to secure long-term, affordable protection against natural hazards such as flooding, heavy rain and storms.

The proposal, presented by the German Insurance Association (GDV), comes amid alarm over escalating weather-related losses and persistent coverage gaps. Insurers are pushing a concept called “Elementar Re” — a pooled mechanism aimed at keeping protection affordable even for buildings in high-risk zones where climate-driven hazards are most acute.

Climate change drives insurer action

Climate-related damage has been rising sharply. TÜV and industry data show weather extremes such as flash floods and prolonged rainstorms have become increasingly frequent and destructive - contributing to insured losses well above long-term averages in recent years. This trend is widely attributed to the effects of a warming climate.

Against this backdrop, the Elementar Re proposal is pitched as a market-based solution to a climate adaptation challenge that existing insurance structures struggle to meet alone. More than 400,000 residential buildings in Germany stand in areas where risk-adjusted premiums would otherwise be prohibitively high — a consequence of rising hazard severity and frequency linked to climate change.

A new model for managing climate risk

Under the model, participating insurers would transfer high-risk property insurance contracts into the Elementar Re pool, capping premiums according to building size and maintaining affordability through a broad risk-sharing mechanism. Private reinsurance layers and a dedicated fund would absorb losses up to a threshold, with a state “stop-loss” back-stop kicking in only for extremely rare, catastrophic events exceeding roughly EUR 30 billion in losses.

“Climate damage in Germany has increased five-fold since 1980,” GDV head Jörg Asmussen said in announcing the plan. “Our goal is a security system that works long term - fair for homeowners, stable for the market, and viable for the public sector. But insurance alone is not enough; without decisive prevention, risks will continue to climb.”

Insurance and prevention: a broader climate strategy

The GDV underscores that sustainable protection against climate-exacerbated natural hazards requires more than pooled insurance. It calls for effective prevention measures, such as strict building standards in hazard zones, mandatory risk assessments for new construction, and better public access to risk data. These steps, insurers argue, are essential to keep coverage affordable and to curb future climate-related losses.

The initiative also reflects broader industry thinking: as climate change accelerates, insurers globally are recalibrating risk models, advocating for climate adaptation policies and seeking to ensure that insurance remains a tool for resilience rather than an unaffordable cost for consumers.