Compulsory flood insurance: A must for all owners!

Compulsory flood insurance: A must for all owners!

On May 30, 2025, Federal Justice Minister Stefanie Hubig (SPD) announced compulsory insurance against natural hazards for residential buildings. This step comes almost a year after the devastating flood disaster in southern Germany, which caused extensive damage in Bavaria and Baden-Württemberg. Hubig makes it clear that broad insurance protection against natural disasters is increasingly necessary. The coalition agreement already agreed to expand insurance coverage against natural hazards in order to minimize the financial burden on homeowners and tenants in the event of damage.

The minister points out that the likelihood of extreme weather events is increasing due to climate change and that many natural hazards are currently not covered by existing policies. This often leads to the need for government help. The coalition partners are therefore planning to only offer residential building insurance with natural hazard insurance in the future. Existing contracts should be expanded to include elementary insurance by a certain date in order to ensure comprehensive protection.

Flood disaster and financial challenges

After the flood disaster in June 2024 caused damage totaling 4.1 billion euros, around half of which was uninsured, calls for compulsory insurance have intensified. According to the General Association of the German Insurance Industry (GDV), over 50 percent of private households in Germany are currently insured against natural hazards. The debate about compulsory insurance is also accompanied by the fact that many flood protection projects in Germany are making slow progress.

The flood situation has become worse in the meantime, especially in countries such as Baden-Württemberg and Bavaria, where dikes are breaking and houses have to be evacuated. The “National Flood Protection Program” was launched over ten years ago in response to more frequent flood events. However, so far only 15 percent of the planned projects are in the construction phase, while many measures are still being planned. Climate change is contributing to natural disasters becoming more frequent in Germany, which increases the pressure for effective protective measures.

Political reactions and outlook

Factual discussions about the introduction of compulsory insurance were initiated. Bavaria's Prime Minister Markus Söder and other state leaders support such an initiative, while FDP General Secretary Bijan Djir-Sarai expresses concerns that compulsory insurance could make property more expensive. A working group is to develop recommendations for the implementation of compulsory insurance; however, the Justice Department is skeptical about this recommendation. A debate on the topic is scheduled to take place in the Chancellery in mid-June, with Chancellor Olaf Scholz and state leaders also taking part.

While the draft law on compulsory insurance is set to be passed in the current legislative period, the exact design remains unclear - particularly with regard to the possibility for private owners to waive insurance coverage under certain conditions. The Justice Department is also planning state reinsurance to control cost risks for insurance companies and premiums for homeowners.

The need for effective measures to deal with flood risks and natural disasters has never been more relevant. The coming months could be crucial in determining whether Germany is prepared to meet the challenges of climate change.

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