Moody’s Ratings has assigned a Baa2 (sf) rating to the €100 million Series 2026-1 Class A Notes issued by Yardstick Re DAC. The notes provide Gothaer Allgemeine Versicherung AG, a German property and casualty insurer, with indemnity flood reinsurance protection for Germany.
Yardstick Re is a bankruptcy-remote Irish designated activity company authorised by the Central Bank of Ireland as a multi-arrangement special purpose vehicle. The notes cover a four-year risk period from 1 July 2026 to 30 June 2030.
The transaction carries an initial attachment level of €1.25 billion and an initial exhaustion level of €1.35 billion, resulting in a €100 million risk layer. Noteholders receive money market fund yield plus an initial risk interest spread of 1.95%.
Moody’s said the attachment level corresponds to an approximate 1-in-448-year return period, or a 0.22% annual attachment probability. The modelled one-year expected loss stands at 0.21%. That level is more than double the losses Gothaer incurred in the 2021 Bernd flood, the most severe German flood on record.
Gothaer reported more than €2.8 billion in gross written premium in 2025 and maintained a Solvency II SCR coverage ratio of 181%. It is part of the BarmeniaGothaer group, which recorded approximately €590 million in gross claims losses from Bernd.
The peril remains one of Germany’s least penetrated catastrophe risks despite recent growth. German flood insurance coverage reached 57% of households in 2025, up from roughly 20% two decades ago, according to Swiss Re Institute research.
Fire and storm penetration, by contrast, remains close to 99% of German properties. That gap helps explain why insurers such as Gothaer are turning to capital markets capacity to support flood-specific protection alongside traditional reinsurance.
Moody’s flagged several risk factors alongside the rating. Gothaer has no prior track record as an ILS sponsor, though it has experience with traditional reinsurance and catastrophe modelling.
The three eligible money market funds carry a Moody’s Aaa-mf assessment. The transaction documents do not require that rating to be maintained throughout the deal’s term. The per-occurrence indemnity trigger could involve lengthy claims processing, with maturity extended quarterly for up to 48 months if losses remain unresolved.
About 8.5% of the net limit falls within coastal flood zones not captured by the modelling. Storm surge cover is typically excluded from German insurance policies. Approximately 52% of the modelled one-year expected loss is concentrated in Nordrhein-Westfalen.
Moody’s said a major flood event in Germany could result in a multi-notch downgrade. A downgrade or withdrawal of the money market funds’ Aaa-mf assessment could also affect the rating. Changes to modelled expected loss under the transaction’s annual reset mechanism could move the rating in either direction.
The Yardstick Re transaction adds to a small but growing set of European flood catastrophe bonds. Flood Re, the UK’s government-backed flood reinsurance scheme, completed its first cat bond in 2025, securing £140 million of UK flood retrocessional cover.
The deal also lands within a record period for the broader catastrophe bond market. Global cat bond issuance reached $25.6 billion in 2025, a 45% increase on 2024, across 122 transactions that included 15 first-time sponsors.
