Historically, for most German policies, terrorism was included but not compulsory. Following the events of September 11, 2001, the widespread inclusion of terrorism cover highlighted the vulnerability of German insurers to terrorist risks. On September 3, 2002, EXTREMUS, a German specialist company covering terror-caused property damage, was created. The company was founded by the Gesamtverband der Deutschen Versicherungwirtschaft (GDV, Association of German Insurers) and is supported with a backstop by the German government.
The primary objective of EXTREMUS is to protect the interests of medium-sized companies and industry in Germany through insurance against property and business interruption losses caused by terrorism. The shareholders consist of primary insurers and reinsurers operating in Germany, and the company is capitalized with EUR50 million (USD70 million) in total.
EXTREMUS Versicherungs-AG, being the original insurer, is the contract partner of policyholders. The company issues insurance policies and assumes all administrative processes (including underwriting and accumulation control), as well as accounting.
Insurance companies and insurance brokers mainly domiciled in Germany with some production sources from abroad are handling the policy sales for EXTREMUS Versicherungs-AG. Total capacity provided on an annual aggregate basis is EUR10 billion (USD14 billion). The first EUR2 billion (USD2.8 billion) of capacity is placed with approximately 50 domestic and foreign insurers and reinsurers.
EXTREMUS provides cover for industrial plants and buildings with sums insured of more than EUR25 million for property damage and business interruption. Only risks located within the territory of the Federal Republic of Germany will be insured. The cover is not compulsory. It can be limited to buildings only, or to the contents of buildings, or to losses arising from business interruption, provided that there is a relevant original property insurance policy for a sum insured above EUR25 million. The maximum (first loss) aggregate limit of indemnity is EUR1.5 billion per policyholder per year. The maximum annual aggregate indemnification for all events adds up to EUR10 billion. War, warlike events, looting, acts by the authorities, and NBC attacks do not fall under the EXTREMUS terrorism coverage.
The Finance Minister of Germany, Peer Steinbrück, extended the government guarantee in November 2007 for another two years until the end of 2009. The German government is likely to extend the backstop again, although to a lesser extent than in the past, with the insurance industry expected to increase its share of the risk. The German government has demonstrated its ambition as being a consistently attractive production place for global companies that need terrorism cover.
More than 1,100 companies took out insurance terror cover for their large domestic exposures in 2007 — i.e., approximately 44 percent of all domestic terror exposed property risks are covered by EXTREMUS.
Given an increased fear of terrorism and due to the new tariff introduced for the 2008 underwriting year, which allows EXTREMUS to specifically price risks according to its location and vulnerability, terrorism cover demand rose nearly 10 percent in Germany at the January 1, 2009 renewal. The number of polices increased to 1,300 in 2009 (from 1,225 in 2008), while premiums remained stable. Demand has increased, in part because of the perceived rise in the threat of terrorism in Germany.
Since 2005 EXTREMUS has been additionally offering cover for industrial risks in the European Union through acting as an intermediary. The risk carrier for those kinds of risks includes a pool of leading Lloyd’s of London syndicates and the Inter Hannover in London.
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