---
title: the factory was sound. the floodplain was full
canonical_url: https://ensurance.app/guide/the-factory-was-sound-the-floodplain-was-full
markdown_url: https://ensurance.app/guide/the-factory-was-sound-the-floodplain-was-full.md
subtitle: what the 2011 Thailand floods taught every tenant about the ground under a lease
category: nature-finance
---

# the factory was sound. the floodplain was full

*what the 2011 Thailand floods taught every tenant about the ground under a lease*

**What is a supply chain disruption?** A supply chain disruption is an event that stops a supplier, a route or a plant long enough that the businesses relying on it cannot make or ship on schedule. In 2011 it was a river plain in central Thailand, and assembly lines in Japan and North America slowed because of it.

In the second half of September 2011, levees on the left bank of the Chao Phraya River broke at eight points between Nakhon Sawan and Ayutthaya. The first estate, Saha Rattana Nakorn, was fully under water on 6 October. By the end of the month, seven industrial estates in Ayutthaya and Pathum Thani provinces were under water. At the Hi-Tech estate, all 130 factories flooded, to depths of up to 3.4 meters. Pumping out began in mid-November and reached the last estate in late December.

The factories were sound. What filled was the plain they stood on: the lower **Chao Phraya floodplain**, a flat alluvial plain a few meters above sea level where, in an ordinary wet season, the river's overflow spreads out. The plain did that work before the first estate was laid out, and does it whether or not anyone pays. Bangkok downstream depends on it, by Guy Carpenter's account, and the estates were built on it. The protocol behind this guide, **[ensurance](/?from=guide)**, is built to give a living place like this an account, so the ones who depend on it can pay for its keeping. The account is not the plain, and no account stops a monsoon.

:::johnson
**a lease covers the building. the ground under it has a second job.** In ordinary years the plain helps hold what the river cannot carry, and no lease names it.

[Read the hub: the loss started outside the property line →](/guide/the-loss-started-outside-the-property-line?from=guide)
:::

## the tenant's checklist was complete

Answer as a careful tenant in Ayutthaya could have in early 2011. Was the building sound? Yes. Did the estate have a flood dike? Yes. Had the dike been tested? Yes: in 1995, the most serious flood in the basin since 1942, the dikes around the industrial parks kept the water out. Had the estate flooded before? Guy Carpenter's one-year review found that none of Thailand's industrial parks had flooded in the previous 40 years. Was the factory insured? Thailand's General Insurance Association confirmed afterward that large businesses in the estates carried cover for flood and for business interruption.

Every box was ticked as of early 2011. In the event the dikes failed too: Guy Carpenter reports that sandbags used to raise dikes gave way, and that Hi-Tech's embankment broke when leakage weakened it. None of the questions asked what the land outside the dike was doing for the site, or what would happen when that land was already full. The checklist stopped at the site line; the water came from outside it.

## the plain was doing its job

Guy Carpenter's review calls floods a natural phenomenon in the lower Chao Phraya basin, where waters usually rise slowly over weeks. It put the river channel's capacity through Bangkok at about 3,000 cubic meters a second; what comes down beyond that spreads across the plains upstream of the city. A 1999 survey by the Japan International Cooperation Agency (JICA), cited in the review, found that Bangkok floods less often than its channel suggests because most of the excess is stored upstream, in the floodplains of the lower watershed.

That storage is the plain's job, and the basin's flood strategy leaned on it: hold water in the dam reservoirs upstream, and let the flood spread wide in the lower watershed so its level stays low.

In 2011 the rain was the heaviest in more than 60 years. At Nakhon Sawan, river flow passed 2,000 cubic meters a second, the level above which the lower watershed floods, by mid-August, and peaked at 4,698 on 13 October. The river overflowed, the levees broke, and the water moved south across the left bank toward the estates. The water went where the water had always gone.

Keeping more of the plain open would not have made 2011 dry; the review judged that, with that much rain, the flooding could not have been avoided, though it also estimated that different dam operation could have lowered discharges in September and October by about 2 billion cubic meters. The claim here is narrower. In ordinary years the plain's storage helps keep water levels low across the lower basin, and that dependence appears in none of the checklist questions above.

## the chain was three links long

Toyota's Thai plants took no physical damage, yet Toyota stopped them from 10 October to 21 November because roads and supplier factories were under water, and cut work as far away as the United States, Canada and South Africa. Nissan's factories were spared; about 120 of its suppliers were not. Honda said a shortage of Thai electronic parts would cut its North American production in November. In all, about 450 Japanese manufacturers were affected.

In hard drives, Western Digital's plants in the Bang Pa-In and Navanakorn estates made about 60% of its disks, InfoWorld reported on 18 October 2011, and the floods had taken about a quarter of world capacity offline.

For a carmaker abroad, this is **contingent business interruption**: a loss that starts at someone else's premises. The [hub](/guide/the-loss-started-outside-the-property-line?from=guide) explains the cover, and [when the supply chain stops, look upstream](/guide/when-the-supply-chain-stops-look-upstream?from=guide) takes the supplier's view. The supplier depended on a plain, so the buyer did too.

## gray and natural on one tenant's desk

A tenant already pays for its gray sources. Rent and service charges cover the estate's dike and drainage; the premium covers the building and the interruption; the dams upstream have operators. Each has an invoice and an owner.

The plain has neither. Its storage reaches the estate as an absence: water that stays in the fields upstream instead of arriving at the wall.

The two kinds interact. The review notes that raising embankments over the decades increased river discharges and flood levels. A wall that keeps water off one site can send it elsewhere on the same plain. That is not a case against walls. It is why every owner on a shared plain has a stake in where the water may go.

## what changed afterward

By September 2012 the government was subsidizing two-thirds of the cost of new flood barriers at the estates, with operators paying for upkeep. The Industrial Estate Authority of Thailand (IEAT) revised its design criteria: dikes above the 70-year maximum flood level plus half a meter, retention ponds and pumps, early warning, and annual inspection.

The criteria also say a dike must "not disturb water way including quantity and direction", so a new wall should not block the channels that carry water away. They say nothing about keeping the plain open.

More than 80% of the factories in the seven estates had fully or partly reopened by 21 September 2012. Most estates planned for 2012 leaned toward areas outside the flood zone, and many investors from flooded areas were planning moves elsewhere.

## the size of the bill

The World Bank's rapid assessment, published in 2012, put total damage and losses at about THB (Thai baht) 1.43 trillion (US$46.5 billion), about 70% of it in manufacturing. Swiss Re's study of March 2012 put insured losses, a different measure, at about $12 billion, then the largest insured flood loss on record. The floods killed more than 680 people.

For a tenant the bill landed on **protected earnings** (weeks to months of lost production), one of [the four bills](/guide/what-ensurance-saves-you?from=guide). A policy and the land that slows the water are not rivals: [the same flood, two instruments](/guide/the-same-flood-two-instruments?from=guide).

## the bill and the source

| | 2011, Ayutthaya and Pathum Thani |
|---|---|
| The property | A leased factory in one of seven flooded industrial estates |
| The source | The lower Chao Phraya floodplain, which in ordinary years helps hold the river's overflow |
| Which bill it landed on | Protected earnings, including production lost at customers abroad |
| Who else leaned on the same source | Bangkok downstream (Guy Carpenter), and buyers from Japan to North America |
| What keeping the source looks like | Nothing documented for the plain itself. The basin's strategy has long relied on flood storage in the lower watershed (Guy Carpenter), and IEAT's 2012 dike criteria ask that new dikes not disturb the waterway |

What a tenant could rationally pay toward keeping that room, and how to share it with everyone else on the plain, is the subject of [what a source is worth paying for](/guide/what-a-source-is-worth-paying-for?from=guide).

## where to start

If you lease or insure a plant on a river plain, add one line to the register: what the land outside the wall does for you. The Chao Phraya floodplain has no account on ensurance yet. You can [suggest one under risk resilience](/specific/create?mode=suggest&agent=risk-resilience.ensurance&name=Chao%20Phraya%20floodplain&from=guide) or [find a place you depend on](/explore?from=guide). For your sector, see [corporations](/solutions/corporations?from=guide&topic=outside-the-property-line), [insurers](/solutions/insurers?from=guide&topic=outside-the-property-line) or [investors](/solutions/investors?from=guide&topic=outside-the-property-line), or [talk to someone about your sites](/contact?from=guide&topic=outside-the-property-line). Ensurance is not insurance and pays no claim: [what ensurance cannot do](/guide/what-ensurance-cannot-do?from=guide).

## frequently asked questions

### what is supply chain disruption?

Supply chain disruption is any event that stops a supplier, a route or a plant long enough that the businesses relying on it cannot make or ship on schedule. In 2011 a flooded plain in Thailand stopped seven industrial estates, and carmakers abroad cut output because parts did not arrive.

### were the factories in the flooded estates insured?

Large businesses in the estates generally were: Thailand's General Insurance Association confirmed they carried flood and business interruption cover. Cover for a customer's loss when a supplier floods is a separate question that depends on the policy wording.

### what did tenants change after the 2011 floods?

More than 80% of factories in the seven estates had fully or partly reopened by September 2012. New estate flood barriers, two-thirds subsidized by the government, were being built in 2012, and IEAT issued revised dike criteria: dikes above the 70-year flood level plus half a meter.

## sources

[Guy Carpenter, Thailand Flood 2011: One Year Retrospective, October 2012](https://www.guycarp.com/content/dam/guycarp/en/documents/dynamic-content/Thailand%20Flood%202011_One%20Year%20Retrospective.pdf) — Levee breaks, the estates and their flood dates, Hi-Tech's 130 factories, the basin's flood storage and the JICA finding, 2011 discharge and rainfall, automaker and Nikon timelines, about 450 Japanese manufacturers, insurance cover in the estates, IEAT's revised dike criteria, and recovery as of September 2012

[World Bank, Thai Flood 2011: Rapid Assessment for Resilient Recovery and Reconstruction Planning, overview, 2012](https://documents.worldbank.org/curated/en/677841468335414861) — Total damage and losses of THB 1.43 trillion (US$46.5 billion), the manufacturing and private-sector shares, and more than 680 deaths

[Artemis, on Swiss Re's sigma study of 2011 catastrophes, 28 March 2012](https://www.artemis.bm/news/swiss-res-latest-sigma-study-puts-2011-insured-losses-at-116-billion/) — Thai floods the largest insured flood loss on record at about $12 billion

[InfoWorld, 18 October 2011](https://www.infoworld.com/article/2263417/the-impending-hard-drive-shortage-and-possible-price-hikes-2.html) — Western Digital's Bang Pa-In and Navanakorn plants made about 60% of its disks; about a quarter of world hard disk capacity offline

[Insurance Journal (Reuters), 5 December 2011](https://www.insurancejournal.com/magazines/mag-features/2011/12/05/226165.htm) — Seven major industrial estates affected and Japanese manufacturers disrupted

## the series

1. [the loss started outside the property line](/guide/the-loss-started-outside-the-property-line?from=guide) — **read first:** one flooded factory, and every hospital that depends on it
2. [a hospital cannot store a watershed](/guide/a-hospital-cannot-store-a-watershed?from=guide) — fifty-four days on tanker trucks
3. [a chip fab still waits for rain](/guide/a-chip-fab-still-waits-for-rain?from=guide) — the year no typhoon reached Taiwan
4. [the factory was sound. the floodplain was full](/guide/the-factory-was-sound-the-floodplain-was-full?from=guide) — this post
5. [the office park stands where the marsh was](/guide/the-office-park-stands-where-the-marsh-was?from=guide) — Chennai's 2015 flood and the shutdowns no policy covered
6. [a lot is not a home until the water is promised](/guide/a-lot-is-not-a-home-until-the-water-is-promised?from=guide) — Arizona's 2023 pause and the aquifer under the plan
7. [the resort never owned the trees](/guide/the-resort-never-owned-the-trees?from=guide) — a ski area, a national forest, and the season a wildfire took
8. [every ship spends water the forest gathered](/guide/every-ship-spends-water-the-forest-gathered?from=guide) — the Panama Canal's dry year
9. [what a source is worth paying for](/guide/what-a-source-is-worth-paying-for?from=guide) — how an avoided loss becomes the most you should pay
10. [how to map what your property depends on](/guide/how-to-map-what-your-property-depends-on?from=guide) — draw the map one ring wider than the deed