German cover for natural hazard damage, long optional and at the centre of the debate on mandatory insurance.
In Germany, Elementarschadenversicherung designates the cover for damage caused by natural elements, flood, inundation, landslide, which supplements the basic home insurance covering storm and hail. Historically optional, this cover is taken out by only a fraction of households, leaving a large share of owners uncovered against floods. The catastrophic 2021 floods in the Ahr valley, which caused considerable damage, reignited the political debate on introducing mandatory natural catastrophe insurance, on the model of other European countries. For insurance, the central issue is adverse selection: optional cover tends to be bought only by the most exposed, degrading portfolio balance, while a mandate would generalise pooling but raise questions of pricing and cross-subsidy between unequally exposed territories.
After the 2021 floods, the low uptake of Elementarschadenversicherung left many German households uncovered, fuelling the debate on mandatory insurance.
Elementarschadenversicherung, assurance catastrophes naturelles allemande, Elementarschaden