A Decade of Challenge, Change and Resilience
By: Mike McNulty, Managing Principal at EPIC Insurance Brokers & Consultants
Over the past decade, California’s wineries have witnessed changes in the property insurance marketplace that would have seemed impossible ten years ago. As an insurance broker focused on the winery industry, I have seen firsthand how movements in the insurance marketplace have reshaped how our wineries do business. As we look for a way forward, it helps to look back at the road that brought us to where we are today.
Think back to harvest time in 2013; vintners prepared to reap the rewards of a long and sunny year, enjoying a high-yield, high-quality crop of fruit. We were all a little nervous about another dry year (California’s rainfall was less than 34% of what forecasters had hoped to receive). And while the state was in the grip of what we eventually realized was its worst drought in recorded history, there was no question that the California wine industry was ascending.
There was so much confidence in the future of California’s wineries that insurers were fighting for the right to provide property and liability coverage. In 2013, the average winery owner/operator could expect four to five insurers to compete for their business, each offering broad coverage, low deductibles, and attractive pricing.
As the wine industry grew and expanded, it sprawled, literally. New wineries were established further and further from urban centers, nestling closer to and even within California’s forests. Proprietors created tasting “experiences” as their properties became tourist destinations. They used the backdrop of California’s incredible geography to blend their wineries into the picturesque terrain with breathtaking results.
The Rise of Climate Change
We would soon discover the unmanaged fuel in those woodland areas were ticking time bombs.
The drought of 2013 would last for another 4 years in most of California – killing plant life, felling trees by the millions and creating acres of tinder ready for a spark. California is no stranger to wildfires, but most of the state’s coordinated efforts went into suppression, not prevention.
According to the California Department of Forestry and Fire Protection, 601,635 acres of California burned in 2013 wildfires – worryingly ahead of 2013’s rolling five-year average of 449,178 acres of yearly wildfires.
Our current five-year average for California wildfires has grown to 1,158,028 acres. To give a sense of scale, that is on par with the entire Grand Canyon National Park set ablaze every year. There is every indication that this is the “new normal.”
2023: The Dynamic Shifts
The insurance industry was not ready for the increasing magnitude and severity of wildfires in California. Blazes like the Glass Fire of 2020, which spread from Napa into Sonoma Valley, threatened the stability of carriers who had once competed for the privilege of serving California wineries.
Their retreat was not subtle. Coverage policies became more restrictive, narrowing the safety net wineries had come to rely on. For many, the cost of insuring their wineries became prohibitively expensive. And it was not just about the cost – the very availability of comprehensive insurance became a luxury item.
Proprietors bolt sprinklers onto rooftops, create fuel breaks, remove trees, bushes, and anything else a blaze could use to sustain itself. In many cases, these owners are frustrated to learn their efforts are not enough to get insurers’ attention and support.
Embracing Technology and Collaboration
We have discovered there is no turnkey answer to the threat of climate change. But wineries have two advantages that might have been unthinkable 10 years ago: emerging technologies and a willingness to collaborate with competitors for mutual survival.
Early detection can make all the difference in responding to a wildfire event. Communities can install camera monitoring systems throughout the community in hopes of catching fires before they get out of control. Once a novelty, flying drones are now table stakes for many wineries. They conduct routine flyovers and capture aerial imagery that can persuade insurers of the comprehensive scale of their mitigation practices.
These images and high-fidelity satellite imagery can now be used in tandem with data analytics to optimize fire mitigation planning and prevention. Companies like FortressFire use aerial assessments augmented with site inspections and other indices to identify and correct fire vulnerabilities that might otherwise have been overlooked.
Wildfires do not respect property lines or municipal jurisdictions, so homeowners and businesses in wine country have banned together to coordinate their mitigation strategies collaboratively.
The New Normal
Over the past few years, California wineries have undergone a profound transformation, confronting challenges that have reshaped their operational landscapes. As the threats of climate change and shifting insurance dynamics loomed, the industry’s response was pragmatic: leveraging technology, refining practices, and fostering collaboration.
The road ahead for California’s wineries remains uncertain, with climate unpredictability and financial challenges. However, the past decade has shown the wine industry’s proactive strategy, built on innovation, collaboration, and strategic adaptation, has equipped their communities to overcome the challenges it faced. It’s a strategy of resilience we should all hope to emulate, including the insurance industry.
Mike McNulty is managing principal at EPIC Insurance Brokers & Consultants. Mike holds over 30 years of experience in the insurance industry, specializing in cost and risk management. He oversees the delivery of extensive insurance and risk management solutions to clients in the consumer beverage business.