ST. HELENA – In 2017, Chappellet Winery spent $200,000 on $80 million in insurance coverage. After the North Bay wildfires in October 2017, the premium increased to $250,000 for $50 million of coverage. Now, after the 2020 Napa County wildfires that devastated the Napa Valley, the winery is paying $1.2 million for just $25 million in protection.
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From 2017 to 2020, wildfires burned through more than half of Napa County’s land area, destroying more than 1,500 buildings. The valley’s fire risk has had a significant impact on the ability of wineries — and all North Bay landowners — to obtain affordable insurance.
As Chappellet’s premiums rose, the owners of the winery on Pritchard Hill in St. Helena worked with their neighbors to reduce the fire risks specific to their property. Chappellet President Cyril Chappellet believes that these efforts have been successful, but premiums have not fallen.
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“That doesn’t work in the long run. Keeping these prices this high is unsustainable in the long term,” said Chappellet, who said the high insurance costs along with firefighting costs threatened to “kill” the winery’s cash flow. “It’s a real challenge.”
Last week, Chappellet was one of more than a dozen speakers at Estate Yountville for the Wildfire Resiliency Summit hosted by Galway Holdings, a financial services and insurance distribution company. The conference brought together winery and insurance representatives, as well as wildfire experts, to discuss the region’s wildfire threats and brainstorm ideas on how to restore insurability to a Napa Valley wine industry that has been increasingly struggling to find affordable insurance since 2017.
“There was nobody leading industry initiatives to bring together insurers, reinsurers, risk modelers, risk mitigation experts and the winery owners – nobody brought them together,” said John Hahn, Executive Chairman of Galway Holdings.
“Right now everyone is just individually oriented, so every winery owner hires a broker to represent them, they go to insurance companies (and) they do their best,” Hahn said at the March 9 event. “They usually come back with a crappy product at a crappy price. So the transaction wheel doesn’t work. We are trying to create another concentrative wheel that has a lot more impact and also a lot more data analysis associated with it so that better decisions can be made.”
Patrick Gallagher, Head of Analytics at EPIC Insurance, spoke about the high premiums wineries paid from 2017 to 2022. Growing areas in six counties including Napa and Sonoma.
According to Gallagher, no wineries in that region filed wildfire claims in 2021 or 2022. An analysis by EPIC Insurance Brokers estimates that these wineries paid $275 million in premiums last year. And while no information is available for 2021, similar to 2022, Gallagher says 2021 also had increased rates compared to 2017 and earlier.
This data suggests that insurers would have recouped losses over the six years given the high premiums paid over the past two years when no regional wineries filed wildfire claims.
“Insurers may be sitting on the sidelines because they’re blending risk with all real estate in California,” Gallagher said. “But Napa wineries have invested more in protection, and they’ve suffered higher rate increases than the broader California wildfire market has matched its historical claims.”
On Friday, insurance company representatives boarded shuttle buses and drove to Chappellet Winery and Harlan Estate in Oakville to tour their properties and learn about the wineries’ fire safety measures, including field reduction, vegetation treatment, emergency exit and bulldozer lines.
Ralph Salce, vice president at Tokio Marine America, an insurance and risk management group, said considering fire risk when deciding whether to insure wineries is critical to what they do. But after the presentations he saw at the summit, he said current approaches may be too broad.
“When you’re underwriting in the office, you don’t see these things, you physically see what’s actually going on on the ground,” Salce said. and what it means), removing fuel from the area or something like that. It’s very abstract, but when you see it in person you realize it makes a lot of sense. This actually improves the risk.”
After hearing about the advances wineries like Chappellet are making to reduce their risk of fire, Salce said he plans to return to his base in Jersey City, New Jersey, to share some insights that are useful for insurers who are doing such Weighing risks across the country are not obvious.
“Being here, seeing exactly what’s being done on the ground, is extremely helpful and gives a real understanding of what’s going on, rather than telling us, ‘This is what we’re doing,'” he told Salt.
Stu Smith, founder of Smith-Madrone Winery in St. Helena, attended the summit hoping to give insurance agents the right context to work on a solution to the insurance cost problem he and his colleagues have been struggling with in recent years had.
“They make money with us. But we need them too. So coming together in a synergistic way is really important,” Smith added. “Ultimately, we hope insurance companies will look at our properties and rate them based on risk and not zip code.”
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You can reach Danielle Wilde at 707-256-2212 or [email protected]
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