Flood risk rampant across Asia factory zones, say insurance ...

By David Fogarty and Clare Baldwin, with additional reporting by Khettiya Jittapong and Orathai Sriring in BANGKOK, Tian Chen in HONG KONG, Andjarsari Paramaditha in JAKARTA, Chang-Ran Kim, Yoko Kubota and Taiga Uranaka in TOKYO, Kevin Lim in SINGAPORE and Norihiko Shirouzu in BEIJING; Editing by Michael Flaherty and Alex Richardson
22 July 2012

BANGKOK/HONG KONG (Reuters) ? Global insurance companies are struggling to get a grip on their flood exposure in Asia nearly a year after one of the world's costliest disasters hit Thailand, with executives fearing an even worse event looms in the region.

Some firms learnt from the Thai floods, with new defenses built to protect multi-billion dollar industrial estates in the country. Insurance premiums have also gone up, but factory construction in flood-prone areas remains rampant across Asia.

Insurance executives say the industry is vulnerable to another major flood, with scientists identifying the coastal plains of southern China as one area at greatest risk.

"When I go and look at these industrial parks and ports in some of the low-lying coastal areas, I just have to stand back and think: Who's insuring these things? Who's done the risk assessment?" said Adam Switzer, a coastal scientist at the Earth Observatory in Singapore.

"What I consistently see on the coasts throughout Asia is that we're still making the same sorts of mistakes."

The Thai floods hit nearly 1,000 factories feeding global supply chains - particularly in the auto sector - costing insurers an estimated $20 billion.

In the rush for development that has lifted millions out of poverty in Asia, many factories have been built along coasts, especially in river deltas. According to insurance industry executives, most construction was done without long-term historical data on floods and storms.

On top of that, rising sea levels, increasing rainfall and more intense storms - together with more people and infrastructure - mean the risks have multiplied.

"We should be identifying these pockets of exposure earlier," said Scott Ryrie, Asia-Pacific vice chairman for Guy Carpenter, a global insurance industry services firm.

The goal, insurance executives say, is to break the cycle of paying for the same losses over and over again.

After the Thai floods, global reinsurer Swiss Re reassessed flood risk in emerging markets. The report's No. 1 risk was China, whose vast industrial estates are at the heart of global manufacturing, making everything from iPads to brake pads.

Among other Asian countries listed, Malaysia was 5, Indonesia 7 and India 10. Thailand was ninth.

Munich Re and Guy Carpenter have also reviewed flood risk models, particularly for industrial parks in Asia.

"A new risk awareness has to set in along the entire value chain," said Tobias Farny, Munich Re's Asia-Pacific chief executive. "The exposures present need to be defined, described and ring-fenced in order to become insurable." [?]

"If we have a really extreme event in China, I am quite certain there would be some surprises for the insurance industry," said Jens Mehlhorn, head of Swiss Re's flood group. "The flooding we see currently in China is just average flooding. We haven't seen a 50- or 100-year flood event in the past 5 to 10 years."

The Pearl River Delta is one of China's biggest industrial zones. The western side of the delta, constructed on sediment-filled fish ponds and rice paddies, is flat for up to 100 km (60 miles) inland, and 40 percent is less than 2 meters (6.5 ft) above sea level.

The government has not published detailed maps showing China's most critical flood zones. [?]

A recent study by Texas A&M University and Yale University shows the amount of developed land in low-elevation coastal areas in China is skyrocketing. In 2000, 13,500 sq km (5,200 sq miles) of low-elevation coastal land had been built up. By 2030, that is set to nearly quintuple to 63,600 sq km (24,500 sq m), an area nearly as large as the Netherlands and Belgium combined.

Another study, in the journal Irrigation and Drainage in 2010, said one third of China's farmland, two-thirds of its people, more than 60 percent of its cities and 80 percent of its GDP were threatened by floods.

Maryam Golnaraghi, chief of the World Meteorological Organization's disaster risk reduction division, said Chinese data is often not detailed enough to be useful - and that some government agencies feel information on water flows is too sensitive to share. [?]

Close to where workers were toiling to build new flood defenses to protect the complex was a bronze statue of an elderly couple standing on sandbags.

They are the estate's founders and the statue commemorates a flood in 1995 in which 1 million sandbags were used to fend off high waters, a reminder that this is not the first time the estate has been threatened. [?]

Source: http://www.desdemonadespair.net/2012/07/flood-risk-rampant-across-asia-factory.html

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