Insurers are preparing to handle more than $10 billion in claims because of the worst Thai flood in nearly 70 years, on top of what already qualified as a record breaking year for natural catastrophes.
The flood waters that began rising more than three months are receding now, but insurers say it is still difficult to assess what the financial costs will be because the situation is changing every day. Insurers and brokers currently estimate that insured losses will be about $10 billion, but Standard & Poor’s current calculates this figure will be about $6.5 billion.
Joy Ferneyhough said the losses are likely to have a magnitude of about 10 billion, or a little more, but qualified: “It’s still ongoing, it’s still developing every day and I don’t think anyone can get there to assess what’s going on. Ferneyhough is an analyst with Executive Noble.
Japanese primary insurers will suffer big losses because so many of their domestic corporate clients established operations in Thailand due to the strong Yen. Tokio Marine and Mitsui reported last week that they expect the Thai flood to cost them $1.3 billion (100 bn Yen) and $1.7 bn (130 bn Yen) respectively. Reinsurers Swiss Re and Munich Re will pay for some portion of the losses incurred by Japanese and Thai primary insurers.
A substantial portion of the costs insurers will face due to the Thai flood will come from business interruption claims because companies around the world had a shortage of parts since Thai based foreign manufacturers of high tech gear were forced to stop production. Gary Lynch explained the huge impact events in Thailand over the past month have had: “Thailand is such a critical cog in the global supply chain for some of these industries. The concentration of organizations and support organizations is probably greater than we’ve seen in any other event.”
Mr. Lynch is managing director of Marsh Risk Consulting, author of “At your own Risk”, and an internationally recognized Risk Management Consultant who has contributed to the World Economic Forum Global Risk Report, appeared on many well known TV programs such as Bloomberg TV, NBC Nightly news, and been published in an many news publications like the Wall Street Journal and Financial Week.
