The floods in Thailand could be the largest loss caused by flooding this decade, according to a representative of Allianz. In this news article, Lutz Fullgraf, Allianz’s CEO for global corporate and specialty in the Asian region, suggested that this will be the largest flood loss for years. We’d offer that it could be the largest flood insured loss ever given that it’s hard to think of an event which happened more than a decade ago that would have caused a greater level of damage and interruption.
We wrote a few weeks ago that estimates had risen dramatically for the amount of insured losses, with broker JLT Re suggesting an insured loss from the Thai floods of up to $13 billion. Allianz are pretty much in line with that thought, stating in the article that insured losses from this event could reach into the double-digit billion dollars.
The combination of compensation to business owners, building owners, home owners (who have insurance) and also the claims arising from manufacturers who have been majorly disrupted by the flooding could lead to this record insured loss. Fullgraf suggested that this event will be a larger economic loss to Thailand than the 2004 tsunami or the riots in Bangkok last year.
Thailand’s insurance commissioner estimated $30 billion in economic losses for the country, but that figure didn’t include any allowance for claims made by impacted manufacturers. The knock on effect to some major global companies who have lost manufacturing facilities due to the floods, particularly Japanese manufacturers, is likely to be huge.
The final loss from the Thai flood event is unlikely to be fully understood for months due to the slow receding of flood waters and development of claims from business interruption. However large it ends up being, it will certainly not be welcomed by reinsurers after the year of losses they have had.
Re/insurers are certainly going to have to adjust the way they look at Asian weather risks such as flooding as the potential for large loss events is only going to get greater as the region develops further and wealth there grows. Yet another reason to take a serious look at other ways to transfer the risks of flooding.