Thai Flood May Lead to $2.5 Billion Payout by Japan Insurers

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Japan’s casualty insurers may face about 190 billion yen ($2.5 billion) in net payouts to cover damages from Thailand’s floods, according to Deutsche Bank AG.

Japanese property and casualty insurers have underwritten as much as 70 percent of seven flooded industrial estates in Thailand that are facing about 410 billion baht ($13 billion) in damages, Masao Muraki, a Tokyo-based analyst at Deutsche Securities Inc., said in a report yesterday, citing estimates provided by Thailand’s Office of the Insurance Commission.

Thailand’s floods may cause about 140 billion baht of financial damage to manufacturers in the seven industrial estates, the government’s insurance regulator said. Water levels in parts of Bangkok may surge to as high as 1.5 meters (4.9 feet) if a major breach occurs in dikes to the north of the capital, Thai Prime Minister Yingluck Shinawatra has said, adding today that it may take as long as a month for the water to recede.

“The exact impact will depend on the underwriting arrangement and the timing of payments,” said Muraki, who applied a reinsurance collection rate of 35 percent in calculating the potential impact in the report. “We plan to update according to the scale of damage.”

The Thai government’s latest estimates show the insured amount may be even higher. Manufacturers in the seven estates have about 457 billion baht of insurance coverage, Chantra Purnariksha, secretary-general of the Office of Insurance Commission, said yesterday, and Japanese insurers account for 80 percent of the insured value.

‘Bodes Badly’

“The gross damage may well be larger than initial estimates,” said Makarim Salman, head of Japan financials research at Jefferies Japan Ltd. in Tokyo. “Factories are still not even…

Full story from Bloomberg Businessweek at http://goo.gl/PpWKC