Thai and foreign insurers will likely face billions of dollars in claims from companies whose estates in major industrial complexes are battling the country’s worst floods in decades.
Seven industrial estates in central Thailand that have been badly damaged by floods are estimated to have insurance coverage of about 600 billion baht (US$19 billion), 30% of which may eventually be paid out, Thai Permanent Secretary for Finance Areepong Bhoocha-oom said Wednesday.
General insurers said they are still evaluating losses from the flooding.
“To date, we have received a lot of notifications of potential losses from clients who are in affected areas,” said Duncan Buchanan, chief executive at insurance broker Marsh in Thailand. “We expect this to continue as the situation continues to unfold, and eventually as the flood water recedes, when the process of assessment will begin in full force.”
“Until insurance assessors can get in, the impact will be difficult to quantify,” he added.
Bernd Kohn, Munich Re‘s chief executive for Southeast Asia, said while it was too early to give exact figures of insured losses or losses for the German re-insurer, “it is already clear that the floods have given rise to a billion-dollar loss economically—possibly the largest overall loss ever from a natural catastrophe in Thailand, exceeding that caused by the tsunami in 2004.”
Flood cover is a common extension with most property-insurance policies, and generally large multinational policies will give full flood cover or it may be a sub-limit in the global policy. But the take-up rate for flood cover and business interruption by Thai companies is relatively low compared with more developed markets, Marsh’s Mr. Buchanan said.
Analysts said a bigger issue will be how the many technology and pharmaceutical companies in these estates will revive production, which has been suspended due to either damage to their facilities or disruption to supply chains. Several electronics firms and chip makers have also suspended output at factories in the region because of the floods.
Manufacturers including Ford Motor Co., Michelin and Toyota Motor Corp. suspended some operations at their Thai plants earlier this month. Hard-disk drive makers Seagate Technology Inc. and Western Digital Corp. have also halted production due to flood damage at their facilities. Hard-disk drives are key components used in PCs and some PC makers have warned in recent days that shipments could slow during the crucial holiday season.
Insurers and re-insurers might review whether they can cover potential flood damage in the future as a result of the current situation, and any refusal to grant new policies could lead to plants relocating abroad, Finance Minister Thirachai Phuvanatnaranubala said. He said this is one of his biggest concerns and that he has assigned Mr. Areephong to discuss the matter with major re-insurers in Japan and the U.K.