Extremus (Germany)
The specialist insurer set up in 2002 by the German market to cover terrorism on large property risks, backed by a federal government guarantee and bought on a voluntary basis.
Extremus Versicherungs-AG was founded in Cologne in the fall of 2002. Reinsurers had pulled terrorism from German treaties after September 11, and the federal government was looking for capacity for large industrial sites, shopping centers and office towers. The scheme departs from the French model on one point that matters: nothing obliges anyone to buy. The primary insurer excludes terrorism above an insured value threshold, around 25 million euros. The insured that wants the cover buys it from Extremus, which issues its own property and business interruption policy. Behind a retention carried by the market and its reinsurers, the federal government guarantees an upper layer. Total capacity, about 13 billion euros at the start, has been reduced over successive extensions. The public guarantee is renewed for set periods, so each expiry reopens the question of its continuity. The low take-up rate is the most discussed feature of the scheme. Large German groups buy little, because they find the premium high for a threat they see as diffuse, and adverse selection shows in the portfolio, concentrated in major cities and exposed infrastructure. For anyone comparing pools, Extremus shares with Pool Re a government guarantee behind a single carrier and voluntary purchase. With GAREAT (Gestion de l'assurance et de la réassurance des risques attentats et actes de terrorisme), the difference lies in the French mandate. It puts terrorism into every property contract and spares the underwriter from having to measure demand.
When it was set up in 2002, Extremus covered risks with an insured value above 25 million euros. According to the trade press, it had capacity of about 13 billion euros, 10 billion of it guaranteed by the federal government.
Extremus Versicherungs AG, German terrorism insurer, German terrorism pool
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