A preview of fire insurance relief coming to California wineries, vineyards this fall
A “last chance” option allowing wildfire-battered wineries to be insured, when a battered Napa Valley tourism shakes off the pandemic and recapping a mayoral career known in part for flood, fires and an earthquake highlighted the North Bay Business Journal’s Impact Napa virtual conference Wednesday.
Insurance: ‘Preventing a financial catastrophe’
It’s been almost a year since massive wildfires were raging in Napa and Sonoma counties, and many local vintners and wine grape growers were getting alarming news that their property insurance would either go away or cost far more because increasing risk of such conflagrations.
Fast forward to today, with the 2021 wine grape harvest barely getting started and fire danger rising, there’s some help coming from Sacramento to ease the situation.
On July 23, Gov. Gavin Newsom signed Senate Bill 11, which unlocks the statutory shackles have prevented the state’s insurer of last resort from writing fire policies for winery and vineyard buildings and infrastructure.
“SB 11, at the heart of it, was about preventing a financial catastrophe that had consequences far beyond Napa County, far beyond California,” said Ryan Klobas, CEO of Napa County Farm Bureau, at the conference.
The most obvious part of the problem was access to coverage. For example, a local farm bureau member used to pay about $300,000 a year for wildfire insurance now pays over $1 million dollars annually for 15% of the coverage, Klobas said, adding other members had their coverage dropped.
The key problem was the California FAIR Plan Association, a pool of basic coverage, was barred by law from underwriting “farm risk,” which included not just commodities that could be covered by crop insurance but also agricultural infrastructure. The fix was first introduced on March 1 and made it to the governor’s desk in just 144 days with bi-partisan support and no opposition.
The FAIR Plan administrators have until Oct. 21 to submit forms and rates for the new coverage to the Department of Insurance. A fix to overall availability of commercial property coverage will have to await regulatory action by the department, Klobas said.
The trade group and state Sen. Bill Dodd, D-Napa, were key proponents of the legislative change in SB 11.
Tourism: When do the dollars return?
Napa Valley’s tourism industry — the second-largest employer in the county — is showing signs of recovery, but it also is plagued by one of the biggest challenges facing the business world.
“In addition to the looming threat of wildfires and its impact, we're challenged by the ability to staff back up and provide service levels that are expected of our luxury destination,” said Linsey Gallagher, president and CEO of Visit Napa Valley, noting the situation is not unique to the region. “But for us, that's going to be what has the greatest impact on our ability to fully recover and return both revenue and economic contributions to what they were prior to the pandemic.”
Gallagher at the conference presented data going as far back as 2018 — the most recent available — that point to how Napa Valley’s tourism industry performed before the pandemic, the decline during last year’s shutdowns and recovery projections going forward.
In normal times, Napa Valley annually sees 3.85 million visitors — 80.8% coming from within the country and 19.2% from around the globe. Of those visitors, 64.5% come for the day and 35.5% stay overnight, Gallagher said, citing data from Destination Analysts, a San Francisco-based market research firm. But it’s the overnight visitors who spend the most, with nearly 70% contributing to Napa’s economy, she noted.
Visitor volume last year in Northern California’s Wine Country, which includes Sonoma County, declined by 44%, with recovery projected to take between two and three years before getting back to 2019 levels, Gallagher said, referring to data from the San Francisco Travel Association and Tourism Economics, a Wayne, Pennsylvania-based firm that tracks travel trends around the globe.
Visitor spending in the region declined last year by 62%, largely driven by the loss of international travelers, Gallagher said, adding that it’s expected to take between four and five years to get back to 2019 revenue levels.