Compulsory insurance for natural disasters – does Germany need a new protection concept against natural hazards?
How sensible is a compulsory solution based on the French or Swiss model?
The flood disaster in the Ahr Valley in 2021 made it clear that Germany is inadequately prepared for extreme weather events. While the risk posed by climate change is increasing, only around 50 percent of German homeowners have natural disaster insurance—compared to 98 percent in France. Is compulsory insurance based on the French model the right way forward for Germany, or are there more convincing alternatives?
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The French CatNat model: attractive only at first glance
Since 1982, France has relied on the “Catastrophe Naturelles” (CatNat) system, which is based on three pillars:
- Mandatory insurance coverage: Damage caused by natural hazards is automatically included in every building and household insurance policy.
- State reinsurance: The “Caisse Centrale de Réassurance” (CCR) assumes risks with a state guarantee.
- Prevention fund: Part of the premium income is used for protective measures and necessary resettlement.
However, this system, which appears attractive at first glance, has significant structural weaknesses: According to the French Ministry of Finance, it has been running at a deficit since 2015. The levy will therefore be increased from 12 to 20 percent of the regular insurance premium at the turn of the year. The claim made by the Center for European Consumer Protection that basic insurance costs “an average of 26 euros per year” is misleading, as the costs for basic insurance must be added.
Furthermore, there is no contractual entitlement to compensation. Payments are only made if an interministerial commission classifies the event as a natural disaster – a political decision with no legal entitlement.
Criticism of the French model by the insurance industry
The German Insurance Association (GDV) warns against directly adopting the French model. Deputy GDV CEO Anja Käfer-Rohrbach speaks of a “complete paradigm shift in the cooperation between the state and the insurance industry,” which also entails constitutional risks. (cf. Versicherungswirtschaft heute, June 7, 2024 – GDV on the debate about compulsory insurance)
The lack of risk orientation is also criticized: the flat-rate levy means that low earners subsidize high earners, regardless of their individual risk situation. The low deductibles of a maximum of €1,520 provide little incentive for individuals to take preventive measures on their own responsibility.
Current political developments: focus on opt-out
In the ongoing coalition negotiations between the CDU/CSU and SPD following the 2024 federal election, a compromise is emerging: instead of strict compulsory insurance, the negotiating partners favor an opt-out model. Under this model, all building insurance policies would automatically include natural hazards, but policyholders could opt out.
The GDV is “cautiously optimistic” about this approach. A paper by the relevant working group in the coalition negotiations states: “We are introducing a rule that, in new business, residential building insurance will only be offered with natural hazard cover, and that, in existing business, all residential building insurance policies will be extended to include natural hazard insurance by a specified date.”
However, Assekurata expert Dennis Wittkamp is critical of the opt-out model: “It could lead to high-risk policyholders deciding against protection and relying on state aid in the event of a claim. This would undermine the desired solidarity.” (cf. Versicherungswirtschaft heute, March 27, 2025 – Reactions to the idea of a state reinsurer)
The Swiss model as a robust alternative
The Swiss model, which SV boss Andreas Jahn highlights as exemplary, offers a noteworthy alternative. It combines state regulation with private-sector approaches and is considered extremely robust and solidarity-based.
In Switzerland, most cantons have compulsory insurance for natural hazards, which is handled by cantonal building insurance companies. The system is characterized by two principles of solidarity: First, all insured persons pay a uniform premium rate regardless of their individual risk (solidarity among insured persons). Second, insurers have agreed among themselves to share the risk, which distributes the burden of major natural hazards (solidarity among insurers).
A special feature of the Swiss model is its consistent risk prevention policy. After natural disasters, so-called “red flag areas” are defined in which new buildings are subject to special requirements or are no longer approved at all. This prevents the emergence of new damage potential.
“We build new houses in flood zones and then wonder why damage occurs. I think that’s crazy,“ criticizes the SV boss with a view to Germany. In the Ahr Valley, almost every building has been rebuilt on the same site – ”which is critical from a risk perspective, even if it is understandable from an emotional point of view.” (cf. Versicherungswirtschaft heute, March 11, 2025 – ZEV: Natural hazard insurance belongs in the coalition agreement)
The financial stability of the Swiss system is also remarkable: building insurance companies operate on a cost-covering basis without state subsidies, have solid reserves, and require hardly any reinsurance, as the risk pool between the cantons already provides a good balance.
European solution as a long-term perspective
While the Swiss model works at the national level, there are also considerations for a cross-border solution.
Analyst Carsten Zielke advocates a European approach: “A European solution would be a fair response to climate change, as it would allow different geographical areas to compensate for each other. Portugal suffers from droughts and earthquakes. France and Germany suffer from heavy rainfall.” (cf. Versicherungswirtschaft heute, March 27, 2025 – Reactions to the idea of a state reinsurer)
According to Zielke, issuing catastrophe bonds covering different risks would allow more risks to be insured at more favorable prices. This could send a strong signal in times of geopolitical uncertainty.
Consensus on prevention
Despite different approaches, all parties involved agree that prevention must be strengthened. For years, the GDV has been calling for climate-adapted planning, construction, and renovation to be enshrined in state building regulations.
Politicians are also examining how planning authorities can be made more accountable, especially when designating new building areas in risk locations.
Conclusion: The Swiss model as a blueprint for a holistic approach
Germany urgently needs better protection against natural hazards. Despite high insurance coverage, the French CatNat system does not offer an ideal solution for Germany—it is financially unstable, legally uncertain, and offers few incentives for prevention.
The Swiss model seems most convincing for the German situation: it combines principles of solidarity with consistent prevention and financial stability. The emerging opt-out solution could be a first step in this direction, but should be supplemented by effective prevention incentives and solidarity-based risk sharing.
In the long term, a European solution could spread the risks even more broadly and make financing more secure. However, one thing remains crucial: an effective system must intelligently combine insurance, prevention, and government protection in order to meet the growing challenges of climate change.
Author: Bernd Lohmeyer, Insurance Transformation Strategist at Materna
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