The commercial insurance landscape for the wine industry has undergone significant changes over recent years. In the past, winery insurance was readily available – however, climate change has caused costs to rise dramatically, prompting some properties to purchase less insurance or forgo it altogether.

Talk to International BaccalaureateDeborah Costa (pictured), senior vice president of Heffernan Insurance, said she has seen many properties choose not to buy insurance, or buy much less insurance, thus taking on the risk rather than transferring it to the insurance industry.

“In the past, winemaking was a favorite of insurance companies,” she said. International Baccalaureate“Ten years ago, everyone wanted to insure wineries. We had a lot of requests from different insurance companies wanting to get into this space and create programs for wineries. Today, it’s a completely different story because of climate change and some important changes in the insurance market.”

The complexity of wine underwriting has been compounded by catastrophic risks such as fires. In California, where Heffernan Insurance Brokers has extensive experience, the cost of replacing expensive winery buildings and the value of the wine itself make it a high-risk area of ​​insurance that requires a significant amount of expensive capacity that may exceed reinsurance agreements. In some cases, this requires going to the facultative reinsurance market and standing in long lines for high-cost terms that are simply not sustainable.

“Carriers are pulling back because of climate change, which requires a lot of capacity from insurance companies, and there has been a decline because of a number of losses incurred by insurance companies across the United States and around the world,” Costa added.

How Technology Is Changing Wine Insurance

Costa highlighted the role of technology in this shift, with insurers now using software, risk modeling and artificial intelligence to determine the level of risk a property may be exposed to. This helps insurers decide how much capacity to deploy and whether to continue writing in a given area. The rising costs of insurance, supplies and labor are challenges that wineries must overcome.

“The cost of insurance has gone up, the cost of supplies has gone up, the cost of labor has gone up, these are increases that are consistent with other industries, but for the wine industry, you can’t pass the costs on to a bottle of wine that’s already expensive,” and it remains a viable option for consumers, especially when Gen Z and Gen Y are consuming less wine than previous generations, Costa explained. “So the industry is looking at its own business models to see how to move forward and remain a viable business.”

As the number of wildfires and the risks have increased, many insurance companies have backed off. As a result, today’s policies come with many restrictions, especially regarding fire risks, and preventive measures have become extremely important for wineries.

“We don’t just work on insurance, we work with properties on risk mitigation, on what they can do to be more vulnerable in order to maintain themselves, to be resilient,” Costa said.

These efforts help make wineries more vulnerable to insurance companies, helping secure coverage for customers even in a tough market.

“We’ve reached a point where we realize that the current price of coverage is not just a sustainable cost; it’s an explosive cost. This is the most challenging insurance market, and we have clients this year who are just saying, ‘Thank you for all your hard work in providing options and different deductibles and different levels of coverage but we’re going to say no this year,’” she said.

Wildfire Challenge for Wineries

Meanwhile, smoke from wildfires poses another challenge for wineries, affecting grapes and potentially ruining the harvest. This adds another layer of complexity to wineries’ insurance needs.

“You may not suffer any damage to infrastructure or property, but you will suffer damage from smoke,” Costa added, stressing the need for brokers to be well-versed in the wine industry and have a comprehensive understanding of the market.

“As a broker, it’s important to know that not all wineries are the same; there’s a lot of diversity in this space, so I think it’s really important to understand the business model and then be able to match that model with the products available to achieve the best outcome to get the most protection possible for the customer,” she said.

However, despite the challenges, Costa remains optimistic about finding solutions.

“There is still enough capacity, it’s just a matter of putting it together and being able to put together an insurance package that provides the best protection based on the budget that this property has,” she added.