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I just wanted to verify this (under ver 9) because I don't remember it happening before.

Italy surrenders and it appears all the hexes accept the ones German units are physically in become owned by Allies. This leaves the Germans unable to move reinforcements into Italy and some of their units cut off from supply. I haven't gotten to the turns that follow to see if the German's have to move through Italy to flip the hexes or not. But if it wasn't for heavy rain the Germans would be in danger of being surrounded throughout Italy with a few well placed invasions along the coast.

@Alvaro - is it not possible to convert, by script, all rail hexes between two Axis held cities to German control when Italy surrenders?
Of course, you will need to check there is no Allies unit in the middle.

Thanks

This was already discussed in 2019 pre-release beta and when the game came out.
The other way causes a different larger set of issues.

Italy has no scorched earth so the Germans need to be prepared to cover all ports and take back a set of rail lines to establish main supply the moment Italy surrenders.
Remember a whole country just surrendered. The Germans are no considered invaders.

FYI this is how it is in World in Flames also.

Germans are going to have to be very careful placing their garrisons when Italy gets one city away from surrender. An Allied prepared for the flip could trap a substantial number of Germans if they don't cover some key areas.