Insights for Your Industry First, extreme heat in traditionally wine-producing regions disrupts traditional growing seasons by drought and by reducing the time grapes need to ripen, which affects their body and flavor. Since the onset of high temperatures has happened rather quickly, winemakers are forced to catch up in their cultivation of modified strains of grapes and development of new wines. Climate change cuts both ways for wine producers, however. While hot temperatures complicate viticulture in previously temperate regions, a warming climate also appears to be creating opportunities for wine production in areas previously considered to be too cold for doing so. Of greater and more immediate impact, however, are the drought-induced wildfires in recent years that have ravaged California and the Pacific Northwest, still the center of wine production in the United States. By the BLS count, nearly 2,000 of the nation’s 5,000 wineries in 2020 were in California; roughly 800 more were in PAGE 2 A Time of Testing for Wineries Continued Oregon and Washington. According to WVA’s methodology, California accounted for more than 4,000 wineries, 43% of the U.S. total, in 2021; 16% were in Oregon and Washington. Wildfires have three principal effects on West Coast winery operators: • The physical damage caused by flames to buildings, equipment, and vineyards; • The effect of “smoke taint” on grapes, which often makes them unsuitable for winemaking; and • The immediate and long-term effects of closing off wildfire-stricken areas from tourists. In 2017, wildfires affecting Napa and Sonoma counties in California damaged 27 wineries, contributing to an estimated $2.6 billion overall insurance loss for Lloyd’s of London. At the time, Lloyd’s had come to be a leading provider of coverage for the California wine sector. In response to the losses, Lloyd’s abruptly pulled out of the market in mid-2019, leaving wineries scrambling for coverage. FAIR Plan Opened Up In the three years since Lloyd’s pulled out, neither wildfires nor insurance troubles have abated for winery owners on the West Coast. Anecdotes abound of winery owners who are paying 3-5 times as much for less coverage than they had before 2017; many can’t find coverage at any price. Responding to the crisis, in July 2021 California acted to allow certain types of farm property to be eligible for insurance coverage under the state’s Fair Access to Insurance Requirements (FAIR) plan, a market of last resort for property owners unable to acquire coverage in the private market. Under the FAIR plan extension, California wineries and other agricultural enterprises will be able to cover residences, barns, crop storage units, and other buildings E04-1027 PROTECTING YOUR PROPERTY 800.426.0677 | aipnw.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2022 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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