Compulsory insurance for natural hazards: rising rents in sight?

Compulsory insurance for natural hazards: rising rents in sight?

The federal government plans to introduce natural hazard insurance as standard insurance for residential buildings. This measure aims to increase the number of insurance policies to better protect homeowners from natural hazards. In particular, the severe weather events of 2017 have reignited the debate about these insurance policies. An information campaign about natural hazard insurance has already been started in Schleswig-Holstein. Michael Herte from the Schleswig-Holstein Consumer Center believes such insurance makes sense, but emphasizes that the decision should be in the hands of the citizens.

A central aspect of this discussion is the planned regulation, which states that residential building insurance in new business should only be offered with insurance against natural hazards. At the same time, existing contracts should be adjusted accordingly by a certain deadline. A proposed opt-out model could enable policyholders to automatically receive natural hazard insurance unless they actively object. Provincial Insurance welcomes this model as it brings both practical and constitutional advantages.

Reactions and concerns from the insurance industry

Another consideration is the potential financial burden for tenants. Alexander Blazek from Haus und Grund criticizes the intended compulsory insurance and estimates the annual costs between 500 and 1000 euros, which could also be passed on to the tenants. The tenants' association in Schleswig-Holstein is pushing for a fairer distribution of costs and is calling for a regulation that prevents insurance costs from being included in the utility bill.

Protection through insurance and the requirement for compulsory insurance

According to estimates, the Baltic Sea storm surge has already caused damage of over 200 million euros in Schleswig-Holstein. Despite these high risks, almost half of homeowners are still uninsured, so several actors, including consumer advocates, are calling for compulsory insurance. This is intended to relieve taxpayers and promote the spread of natural hazard insurance. This is not considered necessary by the insurance industry (GDV), which prefers it to be voluntary.

Federal Justice Minister Marco Buschmann (FDP) has rejected such demands in the past, while state governments support a uniform nationwide insurance requirement. In March 2023, the Federal Council passed a resolution to introduce compulsory natural hazard insurance, but the timing of the law's adoption remains uncertain.

Overall, it remains to be seen how the discussion about natural hazard insurance will develop, particularly with regard to the planned regulations and their effects on owners and tenants.

For more information, see NDR and Financial tip.