“The wine industry was loved by the insurance world”

The commercial insurance landscape in the wine industry has seen significant changes in recent years. In the past, insurance for wineries was easy to come by – however, climate change has caused costs to skyrocket, leading some estates to purchase less insurance or forego it altogether.

Talking to IBDebra Costa (pictured), SVP of Heffernan Insurance Brokers, said she has seen many properties choose not to purchase insurance, or purchase too little insurance, thereby taking the risk of passing it on to the insurance industry.

“In the past, the wine industry was the insurance industry's favorite,” he said IB. “Ten years ago, everyone wanted to insure wine companies. We have had many knocks on our door from various carriers who want to enter the space and create wine programs. Today, that is very different because of climate change and other important changes in the insurance market.”

The difficulty of underwriting the wine industry has increased due to catastrophic events such as fire. In California, where Heffernan Insurance Brokers specializes, the cost of replacing expensive wine properties and the value of the wine itself makes it a high-risk area of ​​insurance that requires high volume and expensive reinsurance deals. In some cases, this requires going to the facultative insurance market and standing in a long line to get the most expensive policies that will not last.

“Carriers are leaving because of climate change,” Costa added. “It takes a lot of energy from the insurance company, and there's been a backlash because of the many losses caused by insurers across the US and around the world.”

How technology is changing wine insurance

Costa highlighted the role of technology in this change, with insurers now using software, risk modeling, and AI to determine the level of risk an asset poses. This helps insurers decide how much capacity to operate and whether to continue underwriting in a particular area. Increased insurance, utility, and labor costs are challenges that wineries must navigate.

“You have these increased insurance costs, increased freight costs, increased labor costs, increases that go along with other industries, but in the wine industry you can't pass the cost on to a bottle of wine that's already expensive,” and stay. a viable choice for consumers especially when Gen Z and Gen Y consume less wine than previous generations, explains Costa. “So the industry is looking at their business models to find out how they can transition and remain a viable business.

As the number of wildfires increases and poses more danger, insurance companies have withdrawn. As a result, policies today come with many restrictions, especially regarding fire risk, and preventive measures have become important in wineries.

“We don't just work with insurance, but we work with buildings on their mitigation, on what they can do to be more vulnerable to self-sustainability,” and resilience, Costa said.

These efforts help make wineries a better risk for insurers, helping secure protection for customers even in a tough market.

“We have come to a place where we understand that the current payment price is not just an ongoing cost; it is an explosive cost. This is a tough insurance market, and we have customers this year who just say: 'Thank you for all your work giving us options, different deductibles and different levels of coverage but we're just going to say 'no. 'this year',” he said.

Wildfire challenge for wines

Meanwhile, smoke pollution from wildfires poses another challenge to wineries, affecting the grapes and destroying the vineyard. This adds another layer of complexity to wine insurance requirements.

“You can't lose a building or property, but you will have smoke damage,” Costa added. He also emphasized the need for brokers to have extensive knowledge of the wine industry and a thorough understanding of the market.

“As a marketer, it's important to know that every industry is different; there's a lot of diversity in that space, so I think it's really understanding the business model and then being able to match that model with the products that are available to best marry to get the greatest possible protection for the customer,” he said.

However, despite the challenges, Costa remains hopeful of finding solutions.

“There's still power out there,” he said. “It's just a matter of putting it together and being able to put together the insurance that provides the best protection based on the budget that a particular property has.”