NU Online News Service, March 28, 2:01 p.m. EDT

The 2011 floods in Thailand were the most expensive flooding on Swiss Re sigma records, but a study of exposures in emerging markets around the world shows that other countries may represent even greater flood risks.

After the Thailand event, Swiss Re says it “undertook a global study to identify other emerging markets comparable toThailand, namely those with high-flood risk and recent strong economic growth.”

The sigma study, “Natural Catastrophes and Man-Made Disasters in 2011” notes that losses mounted from the Thailand event because many international companies over the last decade have invested heavily in Thailand, setting up branch offices or building assembly and manufacturing plants there.

Industries such as car manufacturers and high-tech manufacturing and electronics all suffered losses, and Swiss Re says the floods highlighted the importance of supply chains when calculating an industry’s risk exposure.

The study says, “Companies’ direct investment in foreign countries is increasing, and with it the exposure to foreign local catastrophe risks.”

Turning to other markets with similar growth in economic development, the sigma study says China tops the list for the highest flood risk in emerging markets, followed by the other BRIC nations (Brazil, Russia and India).

Thailand, despite having the highest ever flood insured flood losses so far, ranks seventh, according to Swiss Re. 

The report notes that Vietnam, which ranks tenth, could move up in the rankings as Japanese companies relocate business operations from Thailand. Interestingly, the report notes when discussing the Thailand floods that many Japanese companies initially shifted their production toThailandin the wake of the March 11 Japan earthquake and tsunami.

“Surprisingly, Kazakhstan and Azerbaijan are among the top 10,” the study says. “Both experienced recent high economic growth and increasing foreign investment, particularly in the oil and gas sectors.”

Discussing measures that governments and insurers should take given the flood risks to emerging markets, the study says, “On the one hand, businesses, governments and societies at large should increasingly consider more stringent natural-catastrophe and manmade disaster-risk prevention and mitigation measures, especially in emerging countries of growing significance to the interconnected global economy.

“On the other hand, the insurance industry would do well to further examine the implications of global-supply chains for a more holistic risk assessment going forward.”

The study notes that the Thailand flood event resulted in an estimated $12 billion in insured losses, the highest insured loss in the history of global fresh water floods and more than three times the size of any other insured loss of its kind in history.

Swiss Re says flood-loss potential can be just as high as that of earthquakes and storms. Furthermore, the study notes that floods can happen in almost every county, so there may be more hidden flood-loss potential than the industry realizes.

Regarding overall catastrophe losses in 2011, Swiss Re’s sigma report says catastrophes caused $116 billion in insured losses and $370 billion in economic damages. The year saw 325 catastrophe events, 175 of which were natural with the remaining manmade.

The figures are revised from a December 2011 Swiss Re sigma study, which reported $108 billion in insured losses for the year and $350 billion in economic losses.