Chance of flooding in factory zones is very high.
International insurance companies are struggling to determine the flood exposure risks in the factory zones of Asia following 2011’s exceptionally expensive disasters in Thailand and throughout the region.
These insurers are worried that further losses are on their way.
Some firms have taken the flooding in Thailand as a warning that this will be the future of the international insurance environment. For that reason, they have taken several different actions. The first is that they have given discounts to industries that have put new defenses in place to protect those multi-billion dollar structures. Others have sent their premiums skyward in areas prone to flooding.
International insurance executives say that more major floods are a high risk in many areas.
Scientists have pointed to the southern Chinese coastal plains as the areas facing the highest risk of floods. According to Earth Observatory coastal scientist, Adam Switzer in Singapore, “When I go and look at these industrial parks and ports in some of the low-lying coastal areas, I just have to stand back and think: Who’s insuring these things? Who’s done the risk assessment?”
Switzer also pointed out that he regularly sees the same types of mistakes being made throughout the coasts of Asia. In 2011, there were almost 1,000 factories hit by the floods in Thailand. These businesses were vital contributors to the supply chains around the world, especially in the auto industry. The flooding led to insured losses worth an estimated $20 billion.
As the development boom in Asia has helped to bring millions of people out of poverty, factories have been flying up along the coasts of the countries, particularly in river deltas. According to executives in the international insurance industry, the majority of the construction had been performed without any thought to long term historical data regarding severe storms and flooding in those locations.
This increase in population and infrastructure in these areas, combined with increasing rainfall, rising sea levels, and more frequent and intense storms, has caused the risks in these areas to skyrocket. Unfortunately, this has meant that the international insurance premiums have been forced to rise to compensate for it.