Wineries are particularly vulnerable to earthquakes due to the common practice of stacking barrels of wine on portable steel racks that are prone to collapse when shaken.
In February 2010, for instance, the Chilean wine industry lost more than 12 percent of its 2009 wine production when an 8.8 magnitude earthquake struck the southern part of the country. Industry losses were estimated at about $250 million. Damage included storage tanks that toppled over and barrels of wine that rolled off their storage racks.
A little more than six years earlier in December 2003, close to 20 wineries in the Central Coast region of California near Paso Robles experienced losses when stacks of wine barrels collapsed after a 6.5 magnitude earthquake.
To keep stacks from collapsing, new seismic isolation systems have been developed that use ball bearings that allow barrel racks to glide back and forth rather than topple over during an earthquake. These systems can be costly and are not yet in widespread use.
While the collapse of barrel stacks is a major risk for wineries, the loss of electrical power is also a concern, especially during “crush” when a change in the refrigeration temperature due to an electrical outage may cause fermenting wines to become overheated and ruined.
Smaller wineries may be able to use back-up generators to help them in case of power outages, but generators may be of little use for larger wineries.
Insurance also plays a role in protecting wineries from losses from natural disasters. The financial losses from earthquakes and other natural disasters can be devastating to even the most successful wineries. Insurance products and services designed to address the exposures wineries face every day can help wineries to recoup some of those losses and resume operations with as little disruption as possible.
Thomas Neale is a risk specialist located in Chubb’s San Ramon, California, office.