GVNW calls for early extension of state support for terror pool EXTREMUS

Germany’s risk and insurance management association, the GVNW, has formally asked the country’s Ministry of Finance to announce a hoped-for renewal of German terror insurance pool EXTREMUS as early as possible, to give companies security at a time of heightened terror risk. In a joint letter with the Federation of German Industries (BDI), the GVNW pointed out that there is insufficient capacity in the German and international commercial terror insurance market to meet demand. It stated that against the backdrop of an already hard corporate and industrial insurance market, German companies would face spiralling prices and be unable to secure adequate terror cover if the government were to withdraw its backing for EXTREMUS at the end of this year. The GVNW and the BDI pointed out that when the ministry last granted its renewal in 2019, it was left to the last minute, which made it very difficult for German companies to prepare. The associations have therefore requested that the ministry acts much earlier this time around. If the government decides to withdraw its backing, then insurance managers would need as much time as possible to secure scarce capacity and work on alternative risk mitigation tools, they said. “The geopolitical security situation is steadily deteriorating and the threat from terrorist attacks remains very critical. In our opinion, it is therefore still very important that the German economy can be provided with comprehensive and sufficient insurance cover for property and business interruption risks, from a reliable and financially strong partner,” stated the letter. “Against the background of this threat situation, it is essential for many companies in Germany that such insurance cover can be offered unaltered and uninterrupted, in order to ensure the continuation of their business. If the support from the federal guarantee were not maintained, we fear that EXTREMUS AG would have to shut down its business operations in the short term,” it continued. The two associations said the open terrorism insurance market in Germany and worldwide clearly does not have sufficient capacity to meet demand if government backing is withdrawn. This could have “devastating” consequences for the whole economy, they argued. “We know from past incidents that the business interruption resulting from a terrorist attack in particular would have devastating consequences not only for the companies directly affected, but also for their suppliers, service providers and the entire infrastructure,” continued the letter. “The industrial and commercial insurance and reinsurance market will not be able to replace the capacity offered by EXTREMUS AG. The capacity on offer would be reduced, which would naturally mean that the price of the solutions offered in the free insurance market… would increase significantly; and this in industrial and commercial insurance markets that are currently extremely hard,” added the two associations. The GVNW and the BDI argued that the absence of affordable open-market terrorism capacity would force companies to retain too much risk and leave a nationwide protection gap that would be in no-one’s interest. The associations have requested positive and swift action from the ministry. “Only by continuing the guarantee can it be ensured that German companies continue to have sufficient and reliable insurance cover against damage caused by terrorist attacks. In 2019, the extension of the guarantee was only announced very late in the year. This led to a great deal of uncertainty on the policyholder side. In part, out of concern that EXTREMUS AG would cease to exist, economically poorer hedging alternatives have been taken out outside of Germany,” stated the letter. “Against the background of this experience, we ask the Federal Republic of Germany to extend the state guarantee beyond 31 December 2022 at an early stage and thus to guarantee German companies the planning security they need to protect against terrorist risks,” it concluded.

GVNW calls for early extension of state support for terror pool EXTREMUS

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