China: high growth market, high growth risks

With its large economy and over half of its manufacturing centres exposed to flood risk, China is a prime example of a flood hotspot. Learn more about the potential ripple effects in the new fact sheet Flood hotspot: focus China.

Industrial flood loss potential in high growth markets (HGMs) is enormous. Urgent work is needed to develop more detailed flood hazard and exposure information in these markets, as well as greater analysis of risks along global supply chains.

China is a prime example: over 11,000 foreign-owned companies are in China's industrial areas, with Japan and the US being the top two countries represented.  The companies manufacture products ranging from computers and other electronics to retail goods.

Covers, connections and risk

In Flood hotspot: focus China (PDF, 4.16KB), Swiss Re examines this risk and how insurers could be affected through business covers and supply chain interruption. Out of all HGMs, China has the biggest flood loss potential, with 52% of its industry areas exposed to flooding.  The most exposed regions are the Pearl River area and Shanghai.

The Pearl River area alone has a higher insured flood loss potential than all of Thailand, the high growth market with the second biggest loss potential after China. Since foreign direct investment plays a major role in the financing of industrial exposure, losses could affect insurers outside China. Flooding could trigger a supply chain interruption with possible detrimental results.

HGM flood exposure underestimated

As the huge losses from the 2011 Thai floods show, the risk exposure accumulated by multinationals along their global supply chains has been vastly underestimated. The enormous loss potential associated with flood-exposed industry clusters in China and other high growth markets requires major improvements in detailed flood hazard and exposure information.

Published 11 June 2013

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