In chaos theory, there is a concept known as the butterfly effect. In essence, the theory is that depending on when a butterfly flaps its wings in Tokyo, you get rain and not sunshine in New York. The underlying premise of the butterfly effect is that the world is interconnected in ways that we cannot possibly fully predict or understand.
The recent Thailand floods may support this proposition. To the layperson, “Thailand” may elicit a number of different thoughts, but major manufacturing center is not likely to be one of them. Yet, many of the component parts used in advanced electronics (for example 45% of the world’s computer hard-drives) are produced in Thailand. The recent floods submerged these factories and there is no known resumption date. This is bad news for any manufacturer which production abilities rest, in whole or in part, on the state of the Thailand factories. Major insurers and re-insurers should pay close attention to the developments in Thailand since business interruption claims could be significant.
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