Munich Re is expecting claims in the range of €500m net before tax as a result of the widespread floods in Thailand, which reached their highest point in October and November – making the flooding the costliest natural catastrophe in the country's history.

The estimate is still subject to uncertainty, as the water is draining away only very slowly and has still not fully receded in some areas. Munich Re said it remained difficult to estimate losses in the worst affected industrial areas around Bangkok. The consequence of the floods includes not only damage to buildings but also, and more importantly, to the often expensive production facilities housed in them.

Munich Re Board member Torsten Jeworrek commented:

"Thailand is a wake-up call. In emerging countries of growing significance to the interconnected global economy, the provisions made for and adaptation to such natural hazards need to be improved in order to contain the losses."

The floods have claimed the lives of some 600 people. Not only were hundreds of thousands of houses and vast expanses of farmland flooded, but also seven major industrial areas with production facilities belonging mainly to Japanese groups.

A large number of electronic key component manufacturers were affected, leading to production delays and disruptions at client businesses. Approximately 25% of the world's supply of components for computer hard drives is manufactured in Thailand and was directly impacted by the floods.

Torsten Jeworrek continued:

"It is in the interests of companies to secure alternative key suppliers they can resort to in order to maintain the production process when extreme cases arise. As reinsurers, we will take this risk management aspect even more into account in our pricing of contingent business interruption covers in future."