IAG’s operations in Thailand have so far received around 1500 claims resulting from the country’s floods, with more Australian insurers expected to be affected as the regional business impacts of the floods begin to bite.

IAG owns the Safety brand, which handles motor insurance and is responsible for about 80% of IAG’s premium income in Thailand, while NZI commercial insurance accounts for the rest.

MD Mike Wilkins says the company’s preliminary estimate is a net claim cost to the group of around $50 million after allowance for reinsurance recoveries. He expects claim assessments to take several weeks to complete as the water level slowly recedes.

This estimate assumes the remaining protection available under IAG’s aggregate reinsurance cover, of approximately $25 million, is fully utilised.

Reinsurance broker Guy Carpenter is estimating total insured losses from the Thailand floods to be in the vicinity of $US10 billion ($9.8 billion).

Around 10,000 factories have been affected by flooding in the industrial areas of Thailand. Many supply parts to global companies.

Motor vehicle and electronics companies are seeing production slow or stall, with some estimating it will take up to six months to recover.

LMI Group MD Allan Manning told insuranceNEWS.com.au the repercussions for the insurance industry could be enormous if companies such as Toyota or Sony have business interruption insurance as part of their flood cover.

Car manufacturing in the affected areas of Thailand has stopped. Toyota, whose plants are not under water, cannot reliably source parts from companies whose factories are affected. Honda’s car manufacturing plant is also under water.

Honda Australia spokesman Melissa Cross told insuranceNEWS.com.au it’s “too early to determine the impact on supply and sales to Australia”. The Japanese company’s Thai factory produces five popular models for the Australian market.

Thai factories also make a large percentage of the world’s computer hard drives, and Christmas is a time of high demand. But many major suppliers say they will be unable to resume production until next year.

Dr Manning says this could cause a ripple effect on business interruption policies in countries that rely on their supplies from the Thai factories. As an example, if a vital part became unavailable as a result of the floods and stopped production in Australia, it would be considered an interruption to business.

“This sort of thing could be replicated in many parts of the world,” he said.

“Compared with property insurance, the flow-on is much greater with business interruption cover,” Dr Manning said.