A decade on, learning from Thailand’s devastating 2011 floods
Even before the recent resurgence of flood warnings this year1, for the millions of people, communities and businesses impacted, the devastating floods that inundated much of Thailand in 2011 were not easily forgotten. As the Head of Flood in Swiss Re’s Cat Perils team at the time, I recall the day I began to reckon with the losses from the event as one of the most difficult of my career.
As the last few weeks have reminded us, floods are a seasonal occurrence in Thailand. But it quickly became apparent that the events of 2011 were entirely different, in terms of scale and destruction. I remember telling a colleague there was a high probability the losses faced by the insurance industry alone could easily exceed a few billion dollars, to say nothing of those inflicted on countless others. My co-worker was skeptical initially, but soon received confirmation from other sources that this could be a major disaster.
In the end, the flooding continued for months. The final insured losses reached USD 15 billion, while the total economic losses were USD 46 billion, or USD 55 billion in current terms. It was, and remains, the costliest flood event on record for the global insurance industry.
It’s hard to look for positive outcomes in something that proved catastrophic to so many. Yet as this year marks the 10th anniversary of the 2011 Thai floods, I’m more convinced than ever that the event helped propel flood risk to the top of the policy and business agenda in Asia, and provided a much-needed impetus for us and others to enhance relevant infrastructure, expertise and data capabilities.
Why this event was different
A number of factors were behind what proved to be one of Thailand’s worst humanitarian disasters. In 2011 due to the early onset of the monsoon season, the La Nina effect and remnants of multiple tropical storms, rainfall in Northern and Central Thailand reached its highest level in 50 years. As a result over 30,000 square kilometers were inundated, with floods affecting no fewer than 61 of the country’s 77 provinces. Millions of people were impacted and over 800 died.
Figure 1: The extent of the Thailand flood (in blue) and affected industrial parks
The flooding was also exceptional in terms of duration. Some regions struggled with higher water levels for months on end. What is more, the shocks from the event reverberated globally because flooding was concentrated in key industrial corridors in the downstream area of the Chao Phraya Basin that play a critical role in global supply chains.
At the time an estimated 19% of Thailand’s manufacturing firms were involved in global production2. The country supplied around a quarter of the world’s hard disk drives and flooding severely impacted the output of major producers like Western Digital, causing prices to nearly double globally3. Thailand is also a major hub for many Japanese automakers and manufacturers, and the disaster dealt a direct blow to output and revenues at companies like Toyota4.
Cause for continued concern
The floods of 2011 were a shock, but the troubling reality is that the key factors that made them so widespread and destructive are likely to recur, and may be even exacerbated. Climate change means the frequency and severity of flooding is likely to increase due to a warmer climate and sea level rises.
Our sigma research shows flood losses have been on an upward trend, accounting for 16% of all insured losses from secondary perils from 2011-2020 - even more if floods resulting from storms are included5.
Figure 2: Global insured losses from floods since 1970, in USD billion (2020 prices)
The potential for even greater losses can’t be underestimated, given the wetter atmosphere accompanying a warming climate; greater exposure in low-lying coastal areas, and more land surface being sealed as urban areas expand.
These risks are particularly acute in Asia, which will account for a projected 60% of the increase in the global urban population between 2010 to 2050. Much of that growth will take place in locations vulnerable to natural hazards6. The severe flooding seen in China’s Henan province, Japan and much of Europe this summer, which wreaked havoc on infrastructure and manufacturing operations as well as local communities, again highlighted the global nature of the threat, and consequent economic fallout.
Supply chain risks will also rise given the likely further concentration of value and production in flood-prone Southeast Asian countries like Thailand and Vietnam. Our own research shows Southeast Asian countries dominate the top rankings of attractive manufacturing destinations due to their labour competitiveness and growth potential7. The gap between Japanese firms’ investment into ASEAN versus China doubled from 2017 to 20198, and Southeast Asia has also emerged as the preferred destination for US firms relocating manufacturing facilities outside China9.
Figure 3: Production relocation scorecard (normalised z-score)
Ensuring countries like Thailand can benefit from these macroeconomic trends, and that future floods do not derail growth or supply chains throughout the region and globally, will require concerted action on both the infrastructure and insurance front.
Focusing on data-driven solutions
Thailand’s 2011 floods dealt a severe blow, but also prompted an impressive response. In the years since the country has invested heavily in flood management and mitigation, with the government introducing a strategic water management plan10 and funding anti-flood infrastructure in vulnerable areas11. Re/insurers, meanwhile, have improved understanding of supply chain vulnerabilities and their ability to accurately price flood risk12.
That said there are still significant gaps that need to be addressed. At the national and local level, detailed, accurate information on flooding hazards can be hard to come by, which complicates efforts to assess risks and model impacts. Due to these gaps and floods being by nature hard to predict, flood events are both under-insured and under-reported. This lack of protection leaves Thailand’s economy, and businesses worldwide, vulnerable to significant disruption when the next major event strikes.
Data is key to resolving this challenge, which is why we have invested in developing a proprietary and patented approach to flood hazard calculation. The Swiss Re Global Flood Zones solution available to clients through our CatNet® georisk platform, provides meticulously detailed information on where floods are likely to occur and how they may progress, highlighting critically vulnerable areas and infrastructure.
We have enhanced our monitoring and data visualisation capabilities further through a partnership with leading satellite operator ICEYE that will support early warning systems and real-time flood monitoring. This can contribute directly to disaster response, and accelerate damage assessment and claims payments13.
Figure 4: Flood footprints from CatNet®
Flood risks can also be tackled through specialised insurance solutions, such as the parametric products we have designed to help fund the restoration and conservation of natural assets that can serve as flood defenses14. We can’t stop floods like those seen in 2011, but these innovations, and continued efforts to raise awareness, will build the resilience of economies like Thailand to a type of natural disaster that despite its devastating potential, all too frequently goes unnoticed.
The legacy of Thailand’s floods a decade ago are worth bearing in mind when our studies show many other countries are facing, or will face, similar challenges. It is important that we learn from the past if we are to develop our supply chains, infrastructure and communities with greater confidence.
- From SRI Economic Insights report
- See sigma Natural Catastrophes in 2020 report
- Additional context from SRI Economic Insights report