Thai floods increase claims from Japanese earthquake

Insurers face a sharp and potentially devastating increase in claims after two natural catastophes (the Tōhoku earthquake and the Thailand floods) hit these two large manufacturing centres in a short space of time, according to law firm RPC.

Insured businesses were obliged to mitigate their business interruption losses, which many of them did by moving production to Thailand, but since Mother Nature has now struck that region as well insurers will face claims from both the earthquake and the floods.

“The problem for insurers who provide business interruption cover to Japanese manufacturers is that they have to cover the losses stemming from the Thai flooding because so many businesses moved some or all of their supply chain there,” said Daniel Saville, Legal Director in Reinsurance and Corporate Insurance at RPC. 

“The insurance market will be working with insureds to implement cost effective contingency plans as soon as possible.”

Many of the concerned losses are reinsured in the London market.

Daniel Saville explains: “At this early stage it is not yet possible to quantify the extra damages businesses are claiming but there is a lot of concern about this in the insurance market.”

Many of the concerned losses are reinsured in the London market

RPC

It is expected that the scale and duration of the Thailand floods may lead to insurance disputes in respect of new claims.

Insurers could exclude claims where structural or design defects have led to buildings collapsing, RPC said.

Victoria Sherratt, Partner at RPC: “An additional factor in business interruption claims, especially those arising from electronics manufacturers, is that production may have been scaled up to deliver goods to the Christmas market.  Losses in those cases could be even higher.”