Smoke Index (FIP-SI)
(Jane Tyska/Digital First Media/East Bay Times via Getty Images)
By: Trevor Troyer – Agricultural Risk Management
You may have heard about the new optional endorsement to your grape crop insurance policy. It’s called Fire Insurance Protection – Smoke Index or FIP-SI for short. This does not replace your policy. It is an additional endorsement or option that can be added to your policy. This endorsement is currently only available in California.
The 2020 wildfires had a huge impact on California’s wine production. Vineyards and wineries had huge losses due to smoke taint from these fires. Fire Insurance Protection – Smoke Index adds an additional layer of protection to vineyards impacted by these kinds of fires.
If you are familiar with the Grape Crop Insurance policy you know that there is a deductible. You are covering an average of your historical production per variety. You can coverage an average of your production from 50% to 85%. 50% is cheaper and less likely to pay out and 85% is more expensive but you are more likely to have a claim paid. In my opinion, the sweet spot is around 70% to 75% depending on the size of the vineyard.
If you had 75% coverage you would have a 25% production deductible. In other words, you would have to lose over 25% of your crop to have a payable claim. The first 25% is your deductible. So, if you had 10 acres of Cabernet Sauvignon in Napa and your average tons per acre was 3 your average production would be 30 tons. At the 75% level you would be covered for 22.5 tons and your deductible would be 7.5 tons. I am not going to get into the value per ton as that changes from county to county and can be even higher if a grower has contracts with wineries.
Fire Insurance Protection – Smoke Index helps cover some of the deductible. It’s additional coverage that sits on top of the policy. Here is what it says in the USDA Risk Management Agency’s Fire Insurance Protection – Smoke Index Fact Sheet – “The Fired Insurance Protection-Smoke Index (FIP-SI) Endorsement covers a portion of the deductible of the Grape Crop Provisions when the insured county experiences a minimum number of Smoke Events as determined by the Federal Crop Insurance Corporation (FCIC) in accordance with the Smoke Index Data Provisions (SIDP) and identified in the actuarial documents.”
This endorsement is based on the prices per ton and the tons used in the underlying policy. You cannot cover 100% of your average with crop insurance. You can cover up to 95%, even though a policy may not have that high of coverage. This is done with optional endorsements etc. The FIP-SI covers the deductible portion up to 95%. If you had 50% coverage on your grapes it would cover 45% of your deductible. If you had 75% coverage the FIP-SI endorsement would cover 20% etc.
You sign up for Fire Insurance Protection – Smoke Index by January 31st. This is the Sales Closing Date for Grape Crop Insurance in California. The insurance period for FIP-SI begins on June 1st and ends on November 10th. You do not need to report your acres separately as it uses the underlying policies acres.
Here is the Cause of Loss from the 25-FIP-SI Endorsement:
Cause of Loss
(a) This Endorsement provides protection for Smoke Events that meet the County Loss Trigger when the minimum number of Smoke Events occur in the county as identified in the actuarial documents. Triggered counties will be determined after the end of the Insurance Period.
(b) Individual vineyard yields are not considered under this Endorsement. It is possible that your individual vineyard may experience reduced yield(s) and you do not receive an indemnity under this Endorsement.
(c) The notice provisions in section 14(b) of the Basic Provisions do not apply to this Endorsement.
(d) Once published, FCIC’s determination in section 8(a) is final and is a matter of general applicability, presumed to be accurate, and will not be changed.
So, you may not have any damage to your vineyard or grapes but still get paid. This is based on your County. No adjuster is required on this. You are not required to file a Notice of Loss with your crop insurance agent.
The USDA Risk Management Agency uses NOAA’s Hazard Mapping System’s (HMS) data for calculating Smoke Events and the Smoke Index. You can find more information on this at www.ospo.noaa.gov/Products/land/hms.html.
Premiums will vary with amount of coverage you choose. Prices per ton, averages and acres all change the premium as well. There is a separate administrative fee charged for the FIP-SI endorsement as well.
This is a risk management tool that can help vineyards throughout the state recoup losses due to smoke events.
Trevor Troyer
Agricultural Risk Management
toll free: 888-319-1627
