October 25th, 2011

Update: Floods in Thailand

Posted at 8:53 AM ET

thailand-floods-2-smallThailand has experienced its worst flooding in 50 years over the last few months, leaving more than 360 people dead and causing severe damage across the country, according to reports. Hundreds of thousands of homes have been destroyed or damaged and the floodwaters have severely disrupted manufacturing operations in central regions of the country. The floodwaters are now threatening the capital of Bangkok. Reports said the flooding has affected 61 of Thailand’s 77 provinces, from Chiang Mai in the north to parts 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 so far 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 Thailand’s Office of the Insurance Commission (OIC) saying insurance claims totaling around THB100 billion (USD3.3 billion) have been filed so far.

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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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 floodwaters have reached the outskirts of Bangkok in the last few days and reports say parts of the city have been inundated. Prime Minister Yingluck Shinawatra said water will be allowed to flow through parts of Bangkok out to sea because of a build-up of water to the north. According to reports, around 12 billion cubic meters of water needs to drain into the Gulf of Thailand and a government spokesman estimated the process would take about 10 weeks. Although central Bangkok is protected by flood barriers which are being reinforced, officials urged residents in northern and eastern Bangkok districts to prepare for possible flooding. Reports said several northern suburbs are already underwater. The problems have been exacerbated by high tides, forcing water back up swollen rivers, according to officials.

Damage Assessment

The three months of heavy rain have 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 seven huge industrial estates in central regions to close, according to reports. Around 113,000 people have been evacuated to shelters. The provinces of Ayutthaya, Pathum Thani and Nakhon Sawan provinces to the north of Bangkok have been 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 one of the worst hit areas.

Rail and road transportation has also been affected across northern and central Thailand, with more than 200 roads left impassable and north bound rail services suspended. Reports said the agriculture sector has also been hit, with 12.5 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). The Thai government announced a THB325 billion (USD10.6 billion) budget on October 25 to help rebuild the country.

Manufacturing Disruption

Damage and disruption to the manufacturing sector has been massive after defenses protecting seven industrial estates were breached. Reports said around 1,300 factories have been affected by floods, 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. At Hi-Tech, reports said all 130 factories have been inundated by floodwaters of up to 3.4 meters (11 feet) high. The Nava Nakorn industrial estate in Pathum Thani Province, one of Thailand’s oldest and largest industrial estates, has also been evacuated because of the floods. A seventh big industrial estate was overwhelmed on October 20 when flood defenses were breached at the Bang Kadi estate in Pathum Thani Province. Around 1,000 factories have reportedly been forced to close in total and Thailand’s central bank said the damage to industry is estimated to be more than THB100 billion (USD3.3 billion).

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 supply chains. Reports said Japanese car manufacturers Honda, Nissan and Toyota are likely to suspend production for more than a month because of flood damage and component shortages. Several Japanese companies have been increasingly moving production to Thailand to negate the strong yen and the power shortages that continue to affect Japan following the Tohoku earthquake in March, according to reports. Around 450 Japanese manufacturers have been affected by floods in Thailand, reports said.

Several electronics firms and chipmakers have also suspended output at factories in the region while others have been affected by supply shortages (including Apple and Western Digital). The Labor Ministry said that more than 640,000 people have lost their jobs and over 10,900 businesses nationwide have had to close because of the floods. Reports said most of the factories in the seven inundated industrial estates are aiming to reopen within 45 days of the floodwaters receding.

Bangkok

Despite striving to protect Bangkok, floodwaters have started to affect northern parts of the city and the Thai government is now saying it will be impossible to prevent flooding in the capital. The government has declared that seven of Bangkok’s 50 districts are at risk of flooding. Officials have been trying to drain the floodwaters to the east and west of Bangkok, but they are being forced to open floodgates into the city because of the sheer volume of water building up outside Bangkok’s flood barriers. Reports said the floodwaters have inundated northern parts of the capital, with several districts, including Don Muang, Lak Si and Sai Mai districts in northern Bangkok, flooded since October 22. Hundreds of people were evacuated over the weekend as water in Don Muang and Lak Si reached levels as high as 2 meters (6 feet).

Bangkok’s governor has also recently issued a new flood warning for Bang Phlad district, west of the Chao Phraya River and closer to the commercial heart of the capital. Although central and downtown areas of Bangkok are currently dry, reports said the Chao Phraya River, which runs through the city, reached a record high of 2.3 meters (7.5 feet) on October 24. Bangkok’s governor said the water level is expected to reach 2.6 meters this weekend, while the average flood embankment is 2.5 meters high.

Bangkok’s main international airport, Suvarnabhumi, is operating as normal but reports say floodwaters have reached areas around the city’s smaller domestic airport. Officials said that Don Muang Airport in northern Bangkok will temporarily close at 17:00 local time (10:00 UTC) on October 25 as passengers and staff could have problems reaching the terminal because of the flooding. The airport is expected to reopen on November 1. Reports said Don Muang Airport is also now being used as an evacuation center for around 4,000 people and as the headquarters of the government’s flood relief operations.

The Thai government has announced a five-day holiday in Bangkok and 20 other affected provinces due to imminent high tides and to give residents the option of leaving Bangkok and other inundated towns and cities. A Bank of Thailand official said no decision had yet been taken on whether commercial banks and financial markets would be closed for the holiday. The official added that around 230 bank branches have already been forced to close, most of them in the provinces north of Bangkok.

Insured Losses

Due to the fact the floods are still ongoing, no definitive insured loss estimate has been released. The OIC has said the damage caused by flooding to the six major industrial estates of Bang Pa-In, Hi-Tech, Factory Land, Nava Nakorn, Rojana and Saha Rattana Nakorn is estimated to be THB100 billion (USD3.3 million). The OIC added that these six estates, plus the Bang Kadi Industrial Park, have a combined insurance coverage of THB450 billion (USD14.5 billion). About THB100 billion insurance claims have already been filed, mostly by businesses located in the submerged industrial complexes, according to the OIC.

Thailand’s General Insurance Association (GIA) added that large businesses in the industrial estates have insurance coverage for floods and business interruption and most multinational firms buy coverage with foreign insurers rather than Thai companies. 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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