Munich Re Launches Geothermal Risk Insurance Amid State-Backed Initiative

Insurer Munich Re, in collaboration with Germany’s KfW Development Bank, is launching a groundbreaking state-backed initiative aimed at reducing the financial risks associated with geothermal drilling. This program is designed to stimulate exploration for geothermal energy, a renewable source of heat and power.

Geothermal power stands out as a plentiful energy resource capable of delivering clean electricity and heat, both essential for achieving net-zero emissions targets. It is anticipated that geothermal energy will play a significant role in meeting Germany’s future heating requirements. However, the substantial upfront costs associated with drilling often outweigh potential returns, particularly if a project fails. This financial uncertainty has historically deterred investment in the sector.

To tackle these challenges, the German government is collaborating with private enterprises to facilitate geothermal financing. Munich Re describes this initiative as the first insurance policy of its kind in Europe, based on a public-private partnership.

Under this new program, Munich Re will provide insurance coverage for 30% to 70% of loans for viable geothermal projects. In the event of unsuccessful exploration leading to a claim, KfW will offer a partial debt waiver. Berlin is backing this initiative with €600 million ($705 million) in guarantees, along with an additional €50 million in budget funds, as part of a broader strategy announced on Thursday to attract private capital across various industries.

“We aim to resolve the issue that geothermal projects are currently not bankable due to the unpredictable outcomes of drilling operations,” stated Matthias Tönnis, a geologist and underwriter at Munich Re.

Despite its vast potential, geothermal energy accounted for only 0.5% of electricity generated from renewable sources in the European Union in 2024. In response, Germany has initiated measures to accelerate the growth of the geothermal sector, setting a goal of at least 65 additional projects by 2030. This expansion aims to increase the share of geothermal energy used for heating tenfold compared to current levels.

Herbert Pohl, CEO of geothermal company Deutsche Erdwärme, remarked that the insurance initiative sends a positive signal, indicating that “the great potential of geothermal energy in Germany is being recognized politically.”

Munich Re has a history of pioneering geothermal insurance, having previously discontinued it. The company has now returned to the sector, recognizing that generating heat is technically less complex than producing electricity, coupled with the existence of more viable projects.

Copyright 2025 Bloomberg.

Insurer Munich Re, in collaboration with Germany’s KfW Development Bank, is launching a groundbreaking state-backed initiative aimed at reducing the financial risks associated with geothermal drilling. This program is designed to stimulate exploration for geothermal energy, a renewable source of heat and power.

Geothermal power stands out as a plentiful energy resource capable of delivering clean electricity and heat, both essential for achieving net-zero emissions targets. It is anticipated that geothermal energy will play a significant role in meeting Germany’s future heating requirements. However, the substantial upfront costs associated with drilling often outweigh potential returns, particularly if a project fails. This financial uncertainty has historically deterred investment in the sector.

To tackle these challenges, the German government is collaborating with private enterprises to facilitate geothermal financing. Munich Re describes this initiative as the first insurance policy of its kind in Europe, based on a public-private partnership.

Under this new program, Munich Re will provide insurance coverage for 30% to 70% of loans for viable geothermal projects. In the event of unsuccessful exploration leading to a claim, KfW will offer a partial debt waiver. Berlin is backing this initiative with €600 million ($705 million) in guarantees, along with an additional €50 million in budget funds, as part of a broader strategy announced on Thursday to attract private capital across various industries.

“We aim to resolve the issue that geothermal projects are currently not bankable due to the unpredictable outcomes of drilling operations,” stated Matthias Tönnis, a geologist and underwriter at Munich Re.

Despite its vast potential, geothermal energy accounted for only 0.5% of electricity generated from renewable sources in the European Union in 2024. In response, Germany has initiated measures to accelerate the growth of the geothermal sector, setting a goal of at least 65 additional projects by 2030. This expansion aims to increase the share of geothermal energy used for heating tenfold compared to current levels.

Herbert Pohl, CEO of geothermal company Deutsche Erdwärme, remarked that the insurance initiative sends a positive signal, indicating that “the great potential of geothermal energy in Germany is being recognized politically.”

Munich Re has a history of pioneering geothermal insurance, having previously discontinued it. The company has now returned to the sector, recognizing that generating heat is technically less complex than producing electricity, coupled with the existence of more viable projects.

Copyright 2025 Bloomberg.