Flood era redefines Germany’s nat cat market: Deutsche Rück

Flood-driven risk is reshaping Germany’s market, and Deutsche Rück believes deep modelling and careful risk assessment will sustain capacity.

Key points:
Capacity growth meets increased demand
Public insurer roots drive credibility
Flood replacing storm as key peril

Climate change is no longer a future challenge – it is happening now. It brings both risks and opportunities, and Deutsche Rück addresses it with a disciplined, long-term approach. Profitability, decades of modelling expertise, and trust-based partnerships form the foundation for our sustainable, risk-adequate underwriting, said Caren Büning, executive board member and CUO of Deutsche Rück. “Short-term capacity may look appealing, but it is not sustainable and most often not geared toward long-term stability.”

“Volatility has become the norm – whether driven by climate events, geopolitical shifts, or economic uncertainties,” she said. Büning believes this fundamental shift requires more than capital: it calls for technical credibility, modelling depth, and long-term risk assessment.

Germany is gradually shifting to a flood-peril-dominated market.

Together with Sebastian Hoos, market head Germany, Büning told Baden Baden Today that climate change, soaring claims, and debates over mandatory nat cat cover for homeowners are rapidly reshaping German risk portfolios. The recently higher market capacity meets a corresponding rise in demand.

“From an insurance perspective, Germany is gradually shifting from a storm-peril-dominated to a flood-peril-dominated market,” Hoos noted. The impacts of climate change are already evident. Hydrological processes are intensifying due to higher temperature and atmospheric moisture, while the infamous Vb weather systems, or Genoa lows, now trigger heavier rain and flooding in a warmer atmosphere. Warm seas are driving damage north into Eastern Europe and Germany – where Deutsche Rück faces its greatest exposure.

At the same time, Germany’s protection gap remains comparatively high. As Germany considers for homeowners insurance a mandatory nationwide nat cat and climate risk solution including adaptation measures, Deutsche Rück believes that “elements of European best practices in public-private insurance solutions could also serve as a model for Germany,” referencing UK-style opt-out system Flood Re.

Working closely with clients on Solvency II impacts, optimising reinsurance structures for expanded nat cat coverage, and developing public-private solutions remains crucial. Prevention and adaptation, Büning emphasised, are key to avoiding expensive premiums – they are “a linchpin in ensuring that losses from natural disasters and insurance premiums remain manageable.”

Deutsche Rück’s approach combines cutting-edge models, research investments, and collaboration with other external stakeholders. “Each update to our risk models must reflect climate change,” Hoos said. “It’s not a sudden shift, but rather a gradual transition in which key parameters evolve year by year.” This calls for constant vigilance and adaptability—areas in which Deutsche Rück excels, thanks to its comprehensive modelling of natural hazards in Germany.

“We have developed proprietary models covering winter and summer storms, floods, and earthquakes.” Supported by decades of homeowners’ insurance data, these models are continuously refined. They give Deutsche Rück a clear edge in the German market, Hoos said, compared to competitors that depend on third-party models.

“Managing natural catastrophe risks carefully, while continuously expanding our knowledge and tools, has been deeply rooted in our DNA since our founding in 1951,” Büning added. In international markets where data quality is more limited, our profound experience enables us to critically assess external vendor models and incorporate our own risk perspective into pricing.”

“We have systematically expanded our international activities, with a particular focus on the Middle East, Asia, and Latin America,” Büning continued. But growth is not the goal. Diversification supports efficient capital use but is no substitute for profitability. “We are not driven by growth for its own sake,” she said.

“Our underwriting strategy balances sustainable growth, capital efficiency, and economic value through consistent underwriting and risk management,” Büning explained. This deliberate approach contrasts with market players chasing volume or reacting to capital cycles.

Our priorities are stability, reliability and enduring partnerships.

The same philosophy applies to retention. “Stable levels since 2023 point to a healthier, more technically balanced relationship between reinsurers and cedants, helping to avoid costly money-changing business – although inflation has partly offset these effects,” Hoos said.

Deutsche Rück sees its founding mission with public insurers also as a platform for innovation. The public insurers have established a natural catastrophe pool through Deutsche Rück. This concept generates additional, cost-efficient reinsurance capacity within the public insurers, reinforcing long-term and independent financial stability.

As Büning summarised: “Our priorities are stability, reliability, and enduring partnerships.” In a market where climate volatility and ongoing uncertainties are reshaping every renewal, Deutsche Rück believes that long-term relationships and technical resilience – not scale – will define the next era of European reinsurance.

Caren Büning is an executive board member of Deutsche Rück and chief underwriting officer. She can be reached at: caren.buening@deutscherueck.de.

Sebastian Hoos is market head Germany for Deutsche Rück. He can be reached at: sebastian.hoos@deutscherueck.de.

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