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Thai floods - the forgotten disaster?

It may not have hit the headlines for some weeks, but the flooding in Thailand remains a major disaster from a commercial and human perspective.

The risk profession will, once again, pay out billions of dollars to businesses and communities devastated by the event that has left more than 500 people dead. It is to early to say what the final figure will be, but expectations are that it will exceed $20 billion.

Given the linkages between our sector and climate change, it should come as no surprise that companies will be taking a fresh look at how they assess weather risks globally, and in South East Asia in particular.

"Calculating the true cost of the floods could take years in terms of working out the lost business to Thailand from investors who might now choose to invest in other countries," said Lutz Fullgraf, Allianz's regional CEO for global corporate and specialty.

"This for Thailand is definitely the costliest event, in terms of the insured values, even if you take into consideration the tsunami of 2004 and last year's riots. The loss here is much bigger," said Fullgraf.

Allianz said last year's floods in China caused $18 billion in economic losses, topping a list of the world's costliest floods between 2001 and 2010. Floods in Australia last December ranked number 6 at $5.1 billion.

Flooding in Thailand has swamped some 900 factories in seven industrial estates north of the capital Bangkok, disrupting supply chains of many international companies, including Toyota Motor Corp, Sony Corp and Lenovo Group Ltd.

The disaster could shave 2.5-3 percentage points off the country's GDP growth, Thailand's deputy prime minister has said.

"The climate is changing and the question is really are we prepared for it, especially in Asia where there are a lot of developments at or close to the sea and low-lying areas. The impact will be significant," he said.

Businesses in the region will be looking at ways to mitigate climate risks in future. This could be as simple as building on higher ground or building factories with raised manufacturing floors.

Last week, Munich Re said a series of natural disasters in Asia-Pacific, including the quake and tsunami in Japan and floods and a major cyclone in Australia, had caused $259 billion in economic losses for the first nine months of 2011. That is 80 percent of all losses globally.

This will have an impact on loss adjusters, who are more likely to spend time in devastated areas, and underwriters, who will have to rethink how they price a risk and which risks they accept.

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