What does 2023 have in store for winery insurance? More capacity, advanced risk mitigation
U.S. wine-producing regions didn’t see any major wildfires in 2022, but cyberattacks become more prevalent. Will 2023 hold more of the same?
We may have avoided major catastrophic wildfires for the most part in wine country in 2022, but smaller fires and other events posed risks of their own. Winery owners and operators continued to face challenges related to public health issues, supply chain shortages, inflation and more. That said, 2022 was not all bad, several positive trends emerged and are likely to continue on the risk management side.
Let’s take a look at what we saw in winery insurance in 2022, what we can expect to see in 2023 and what it all means for agents and brokers engrossed in, considering or already sampling this specialty.
The state of the market
Notably, 2022 featured some return of capacity from carriers. This was the second consecutive year without a catastrophic major weather event, serving to bolster the market’s growing appetite.
After several difficult years plagued with underwriting challenges, agents and brokers are starting to see opportunities in the industry. Reinsurers have been viewing the industry with a limited and cautious approach. Agents and brokers may want to act fast now, but patience is key. Prioritize keeping submissions coming as the market continues to stabilize and capacity bounces back.
We continue to see damages get progressively higher in favor of plaintiffs. Juries appear to be siding heavily against the industry. To navigate this environment, agents and brokers will want to continue to recommend their winery clients secure adequate excess liability insurance in case of any potentially significant verdicts.
Reflecting on risk
In terms of risk, 2022 hosted wildfires, cybercrimes, staffing-related risks and more.
Even without a major weather event in major wine regions this past year, 2022 was still not without its share of storms and fires. The McKinney fire, for example, destroyed 185 structures, burned 60,138 acres and injured 12 according to data from Cal Fire. The Oak fire added another 18,000 acres burned and destroyed at least 42 structures in the region. While the year may not have seen as many significant fires, weather events like these certainly took their toll.
Additionally, cybercrime has been up significantly in the business world, with an estimated 42% increase in cyberattacks in the first half of the year and a corresponding rise in claims at wineries. At our company, PAK Programs, we’re seeing frequent fraud with wire and money transfers leading to major losses at wineries. The industry is also experiencing more frequent, costly malware-based attacks with several wineries falling victim to ransomware, spyware, viruses and more. Just this year, Vinomofo, a major online wine seller, was hit by a massive data breach, which placed the data of 500,000 customers at risk.
In addition to cyber, we’ve seen general liability claims growing among wineries this year. With the staffing shortages and rising costs to doing business, winery owners and operators have been experiencing high staff turnover and, as a result, have struggled to make quality, long-term hires. As wineries struggle to fill out their teams, we have seen a rise in claims related to inadequate staff training in areas such as maintenance and liquor liability.
Mitigating losses at wineries
As we look to the year ahead and vow new year resolutions, agents and brokers might want to consider resolving to continue to improve communications regarding risk management with their clients. Risk education can make a real difference in protecting property, possibly reducing rates and securing a client for the long term.
There are several steps agents and brokers can talk to their winery clients through to limit losses at wineries. First, agents and brokers should work with a carrier that specializes in the industry and relay the value that specialist brings to their clients. A specialty insurer will be able to provide access to the right expertise and coverage to address a winery’s unique risks. Furthermore, partnering with a carrier that is creative and adapts to new technology can ensure your operation is always up to date on the latest in risk management expertise.
For example, drones and 360-degree cameras are growing technologies used by insurance specialists that can provide a comprehensive risk assessment to wineries. By utilizing these innovations, carriers can create accurate models of winery properties and assess potential hidden risks on site. These specialists can also build interior 3D modeling and use telemetry to accurately measure structures and assets across the property. Tools like these can greatly assist agents and brokers in providing comprehensive loss prevention analysis.
This new technology can help address insured-to-value issues as well. As we all know, with prices rising dramatically, insureds across nearly all industries are finding their coverage inadequate when the worst happens. Agents and brokers can work with their clients to ensure they have accurate values for their buildings and equipment. Agents and brokers can also work with winery owners to ensure they aren’t putting all their eggs in one basket. For example, they should discourage winery owners and operators from stocking all their wine in one building.
Beyond working with the right partner, encouraging proper risk management is essential. Having a formal, documented risk management plan for wildfires, formal training policies and training protocols for red flag warnings or active fires will ensure a winery is better prepared for the coming year in risk. Agents and brokers can encourage the importance of a strong risk management plan by explaining how properties that buy into risk mitigation will find better coverage and lower rates.
As we head into the new year, opportunity in the winery space for insurers, agent and brokers abounds. With new capacity, agents and brokers who want to grow in or try this niche should forge ahead. But as always, we need to proceed with caution, proper planning and an emphasis on risk management.
Larry Chasin is president and CEO of PAK Programs, which provides insurance programs for wineries, vineyards, breweries, wine & liquor retailers, cideries, meaderies, distilleries, liquor & wine importers and distributors. He can be reached at larryc@pakprograms.com.
Opinions expressed here are the author’s own.
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