Skip to main content

California Wild Fires, the Winery Industry and the London Cargo Market

Tiina Ruhlandt, President and CEO at EIMC, outlines the consequences of the Californian wildfires on the local wine industry.

Mon 04 Feb 2019

In 2017 northern California experienced a “firestorm” – there were over 250 wildfires including 21 major ones.  On 8 October the Tubbs and Atlas fires broke out causing panic and serious damages in the well-known wine regions of Napa and Sonoma.

California is the world’s 4th largest wine producer in volume.  While Napa and Sonoma wine production accounts for less than 10% of this total, the two counties produce some of the mostly highly prized – and priced wines.  The two renowned regions’ production accounts for over 50% of retail value.

Over the last decade California winery business has come to look to the London Cargo Market for insurance, particularly stock throughput policies.  The proliferation of wineries (well over 800 in Napa and Sonoma today) combined with high values and catastrophe risk exposures of wildfires and earthquakes increasingly put pressure on the US domestic insurance market.  And London’s decades-long experience in stock throughput covering the international supply chain for manufacturers expanded to include goods (stock) through various stages of production.   The journey of a wine grape includes harvest, destemming, crushing, fermentation, aging, and bottling – and can take up to about 5 years.

The risks vary according to the stage of processing and the season.  Historically the California wild fire seasons’ peak has coincided with harvest season for grapes.  This is the period of greatest exposure to damage from fire and smoke.  Aside from the direct burn risk, fires disrupt harvesting and processing.

One of winemakers’ biggest concerns is access.  Lack of access and lack of personnel means some grapes may be left on the vines; picked grapes may spoil in their bins.  The usual daily tastings and adjustments during fermentation cannot be made.  Nor is pump-over or push-down happening – the process of submerging skins and releasing carbon dioxide in red wine making during fermentation. Excessive heat can negatively impact wines in the fermentation stage causing cooked flavors and killing the yeast.

Another major worry is possible smoke taint.  That smoke taint is a concern for grapes still on the vine has been established.  There is the loss experience from Australian brushfires in 2003 as well as Mendocino California fires in 2008 and Washington state in 2012.  Research has been done; and winemakers have learned about techniques to try to counteract smoke’s impact.  After the 2017 events, Napa and Sonoma vintners are further experimenting.  The issue remains a complex one.  There are no easy answers as there is a multitude of factors that will influence whether or to what extent grapes might suffer from smoke taint:  obviously the density and duration of smoke exposure and the materials fueling the fire, but also the soil type, type of grape, winemaking technique, and more.  Taint may not become evident until the wine is finished despite lab analysis and tasting along the way.  Scientific analysis is useful but also has its limitations.  For example, many winemakers toast their barrels, meaning they char the insides in order to develop certain flavors.  This can show up in lab analysis with the same compounds found from smoke taint.

Ultimately wine-making is both a science and an art.  It is instructive that throughout the process, winemakers taste their product as well as use scientific analysis.

If there is one lesson to take away it is that the 2017 California wild fires revealed that there is much that we still do not know.

EIMC is our appointed Lloyd's Agent in New York, Boston, Norfolk (VA), Chicago and San Francisco.