The federal government, however, said it expects the amount of the guarantee to be gradually reduced

The German Federal Ministry of Finance has decided to extend its Euro8m terorism pool backstop of EXTREMUS AG for two years after December 31, 2007.

The ministry said the extension would ensure that in the event of a terrorist attack in the Federal Republic of Germany there was sufficient protection for the insured.

Germany follows the example of other major countries, such as the United States, France, Spain and Britain, where comparable mechanisms exist.

The federal government, however, said it expects from January 2010 the amount of the guarantee to be gradually reduced.

Earlier this year, the ministry had suggested that it might not extend the two-year guarantee for EXTREMUS for a fourth term. At the time, the government said that insurance buyers could get coverage from the international insurance markets.

Günter Schlicht, chairman of the German risk management association DVS, commented: 'We are happy with the decision of the Ministry of Finance. DVS has pleaded all along to extend the government support. Extremus is needed to guarantee a stable reliable cover for exposed risks.'

He added: 'For customers the extension of the support means that they do not have to rely on markets which may withdraw the cover when deemed appropriate (i.e. in case of a terrorist attack). At the same time they will have to follow very closely market developments since the government has indicated that it aims at a continuous withdrawal from a state guarantee after 2009.'