October 17th, 2011

Floods in Thailand

Posted at 3:15 PM ET

thai-floods-smallThailand has experienced its worst flooding in decades over the last couple of months, leaving more than 300 people dead and causing severe damage across the country. Hundreds of thousands of homes have been destroyed or damaged and the floodwaters have severely disrupted manufacturing operations in central regions of the country. Reports said the flooding has affected 61 of Thailand’s 77 provinces, from Chiang Mai in the north to parts of the capital city of Bangkok. The provinces of Ayutthaya, Pathum Thani and Nakhon Sawan to the north of Bangkok have been particularly badly hit by the floods, according to reports. A third of the country remains under water and the floods have forced several industrial parks to close. Officials estimate the floods have affected more than 8 million people and caused economic damage of up to THB150 billion (USD5 billion). The floods are also expected to impact (re)insurers, with the Office of the Insurance Commission (OIC) giving a preliminary loss estimate of around THB20 billion (USD650 million) for damage at major industrial estates in Ayutthaya Province alone.

Flooding Extent

The flooding, triggered by monsoonal rains and heavy precipitation from the remnants of Tropical Storm Nock-ten, initially triggered flooding in northern Thailand in late July and early August. The northern provinces of Bung Kan, Chiang Mai, Lampang, Lamphun, Mae Hong Son, Nakhon Phanom, Nan, Nong Khai, Phrae, Sakon Nakhon, Udon Thani and Uttaradit were affected before the floodwaters flowed downstream of the overflowing Yom and Nan Rivers and inundated the upper central provinces of Phichit, Phitsanulok, Sukhothai.

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Hazard data illustrated in the CAT-i map was taken from i-aXs®, Guy Carpenter’s web-based risk management platform. i-aXs users can view impacted areas on any map as well as see how their portfolios were affected. Please contact your broker or GC Analytics (SM) representative for assistance or go to www.i-axs.info for further information.

By mid September, several lower central provinces had been affected by the floods (including Ang Thong, Ayutthaya, Chai Nat, Nakhon Sawan, Nonthaburi, Pathum Thani, Sing Buri, Suphan Buri and Uthai Thani) as the floodwaters continued to move downstream. The flooding reached the outskirts of Bangkok in the last few days but early indications suggest the city escaped major damage after officials strengthened the city’s system of dikes and canals. Although some flooding was reported in Sai Mai district, officials said conditions in Bangkok remain mostly normal and the city’s airport, Suvarnabhumi, is operating as usual. Officials said the city’s Chao Phraya River has now reached its peaked.

Damage Assessment

Three months of heavy rain has caused widespread damage across northern and central Thailand. Floodwaters several meters deep in places have destroyed or damaged around 800,000 homes across the country and forced several huge industrial estates in central regions to close, according to reports. Tens of thousands of people have been evacuated to shelters. The provinces of Ayutthaya, Pathum Thani and Nakhon Sawan provinces to the north of Bangkok were badly affected by the floods. Reports said efforts to protect Bangkok left nearby areas to bear the brunt of the flooding, with the ancient city of Ayutthaya was one of the worst hit areas. Rail and road transportation has been affected, with more than 200 roads left impassable and north bound rail services suspended. Reports said the agriculture sector has also been hit, with 10 percent of Thailand’s rice paddy damaged. The Thai government estimates the floods are likely to cut economic growth this year by between 1 percent and 1.7 percent and the University of the Thai Chamber of Commerce has estimated the cost of the floods will be about THB150 billion (USD5 billion).

Manufacturing Disruption

Damage and disruption to the manufacturing sector has been massive after defenses protecting industrial estates failed. Reports said dozens of major factories have been flooded, disrupting manufacturing supply chains inside and outside of Thailand. The production of cars, electronics and other goods has been halted in central areas of Thailand as hundreds of factories are under water. Five industrial estates (Bang-Pa-in, Hi-Tech, Factory Land, Rojana and Saha Rattana Nakorn) in the badly-affected province of Ayutthaya have been flooded, according to reports. The Nava Nakorn industrial estate in Pathum Thani Province, one of Thailand’s oldest and largest industrial estates, has also been evacuated.

Reports said many of these industrial estates house both local and international factories and businesses, with large numbers making electronic components and car parts. Several firms have been forced to suspend production because of damage to facilities or disruption to local supply chains. Japanese car manufacturers Honda, Nissan and Toyota are likely to suspend production for more than a month because of flood damage and component shortages, according to reports. Some electronics firms and chipmakers have also suspended output at factories in the region. The Labor Ministry said that more than 260,000 people have lost their jobs and over 6,500 businesses nationwide had to close due to floods between the period of October 10 and 12. The Federation of Thai Industries estimates the cost of the floods in the Central Plains to be around THB190 billion (USD6.2 billion).

Insured Losses

Due to the fact the floods are still ongoing, no definitive insured loss estimate has been released. The OIC has given a preliminary loss estimate of around THB20 billion (USD650 million) for damage at major industrial estates in Ayutthaya. However, reports said the General Insurance Association (GIA) believes the amount will be higher. According to the GIA, plants in Ayutthaya Province alone have insurance coverage totaling THB200 billion (USD6.5 billion). Residential losses, meanwhile, are expected to be limited as reports quoted the GIA as saying that less than 1 percent of households in Thailand have insurance that covers flooding.

Sources: USGS, Reuters News, Associated News, Agence France Presse, CNN News, BBC News, Thai News Service, Bangkok Post, Xinhua News Agency

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Guy Carpenter publishes CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email CAT.i@guycarp.com if you wish to be added to the free email distribution list.

Guy Carpenter compiles RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email RISK.i@guycarp.com if you wish to be added to the free email distribution list.

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