Rapid Assessment for Resilient Recovery and ... - GFDRR

The bond market 58 became more active in August and September (the latter being more
than 30 percent higher in terms of trade volume than July), and although October was
down by 3 percent compared to July, the yields on all tenors were down compared to
September, suggesting that the markets were relieved that both the floods and the political
situation were under control.
Insurance Companies
For the insurance sector, there are a limited numbers of branches which are, on average,
far smaller and less expensively equipped than banks. Not surprisingly, there was no
significant damage reported for the insurance sector either.
As the floods were ongoing at the time of writing, with the potential for the overall situation
to get worse, any estimation of the property and business interruption insured losses is
premature. Loss assessors could not access most of the damaged properties. However,
in the context of the early rapid assessment, some calculations relying on expert judgment
can be conducted to derive the preliminary estimated insured losses. Those preliminary
estimates build on (i) the total sum insured as reported in the insurance policies and (ii)
assumptions on the damage ratio for similar events in other countries.
Total sum insured (TSI) of the property insurance policies for (i) industrial estates and (ii)
households and SMEs properties (including automobile) have been provided by the Office
of the Insurance Commissioner (OIC) of Thailand. Property insurance policies underwritten
by firms located in the industrial estates usually cover both the building and the content
(e.g. expensive machinery) and include a guarantee against natural disasters including
floods. Some firms have also purchased business interruption insurance. Property insurance
policies underwritten by households and SMEs are usually limited to fire insurance, but it
is estimated that about 10 percent of them also include an extension of guarantee against
floods.
It is estimated that these catastrophic floods will cause a damage ratio between 20 and
30 percent: preliminary insured loss estimates are between 20 and 30 percent of the TSI.
Assuming that the floods will cause business interruption of 3–6 months, those firms that
also have business interruption insurance will be compensated for 3–6 months (out of 12
months) of their TSI associated with business interruption. Lower and higher estimates of
insured losses are derived as follows: lower estimate assumes that the damage ratio is 20
percent and the business interruption is 3 months; higher estimate assumes that the damage
ratio is 30 percent and the business interruption is 6 months.
Based on the above, Table 20 gives preliminary insured loss estimates under two scenarios:
(i) areas already flooded, and (ii) areas already flooded and areas at risk of getting flooded.
If the flooded area does not expand further, preliminary insured loss estimates are
between THB 109.9 and 165.7 billion, where the vast majority (85 percent) of the insured
losses are from damage on the industrial estates.
58 Where government bonds usually represent 99 percent of traded volume.
64 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING