The state’s wine industry could lose $100 million this year if just a portion of grapes are lost.Following the recent wildfires that ravaged Northern California, the region’s wine makers have begun to rebuild one of the state’s largest and most important industries. With more than 1,000 wineries in Napa and Sonoma counties alone, California’s wineries poured nearly $58 billion into the state’s economy last year.
Soon after the fires subsided in mid-October, a spokesperson for the Napa Valley Vintners trade association told Reuters that about 30 wineries reported “some degree of damage,” while six sustained significant losses. While RMS estimated that insured losses caused by the wildfires could reach $8 billion, that figure excludes destruction to agricultural crops like grapes.
Some experts have attempted to calculate the probable cost to the wine industry. Dan Sumner, an agricultural economist at the University of California, Davis, told Bloomberg that the Northern California wine industry stands to lose $100 million if just 10% to 15% of this year’s harvest was ruined. His estimate did not include building or structural damage to the wineries.
Rob McMillan, EVP and Founder of Silicon Valley Bank’s wine division, told Bloomberg that most vineyards in the region escaped serious damage because vineyards act as a buffer against fire. He added, however, that re-farming just one acre of destroyed wine-growing land means a winery could lose $360,000 in revenue over five years.
Insurance Reps on the Ground
Following the devastation, insurance agents and carriers quickly mobilized to help displaced homeowners and business owners, dispatching mobile claims units to the most affected areas. Allstate Insurance Co. sent mobile response vehicles to hard-hit Santa Rosa by October 11. Similarly, CSAA Insurance Group, an insurance affiliate of AAA and a leading home insurer in California, deployed its catastrophe response unit to the Sonoma County Fairgrounds. By October 18, CSAA has handled about 2,500 claims.
Many agents living in the area continued to aid their clients even though they were personally affected by the wildfire. Robb Daer, principal of the George Petersen Agency in Santa Rosa, told Insurance Journal that nearly 100 of the agency’s employees had either lost their homes or been evacuated. Nevertheless, the agency had processed some 700 claims and paid out $500 million as of October 19. “It’s just been overwhelmingly crazy,” Daer said.
CSAA representative Jason Willett told Insurance Journal that all carriers working in the region aim to process wildfire claims as smoothly and swiftly as possible. “Insurance helps rebuild people’s lives — that’s what insurance is for, to help people get back on their feet, recover and move on with their lives,” Willet said.
“Significant Event” for the Insurance Industry
While promising to help policyholders, insurance reps in Northern California also emphasized the severity of the destruction. Phil Telgenhoff, an Allstate Field Senior Vice President, called the disaster “a significant event” for the industry. “This is going to take a massive effort by everyone, but this is why we are in the business and this is why we are here,” Telgenhoff told Insurance Journal.
The recovery will be particularly challenging for vineyards, which are typically insured by two types of policies — wine grape insurance that protects against crop failure and property insurance that covers damage to buildings, equipment, and inventory. Unfortunately, many smaller wineries find themselves underinsured because of the highly specific nature of winery insurance, Tom Pagano, account executive and head of the vineyard insurance practice for Aon Plc, told Reuters. For example, while grape crops may be covered, vines may not be. Pagano added that smaller wineries may not be fully insured for grape spoilage caused when utilities are down
In addition to support from the insurance industry, California is hoping to receive federal aid to help rebuild its wine-making industry. Earlier this month, Gov. Jerry Brown and 41 lawmakers from the state sent a letter to the White House requesting $7.4 billion in funds, $3.1 billion of which would be earmarked for California’s agriculture business, including vineyards.