Insurance Update The cost of the Kaikoura earthquake. INSURANCE EXPERTS have estimated insured winery losses of around $200 to $250 million from November’s Kaikoura earthquake ICIB Senior Broker Daniel Szegota says the estimate is mainly based on damage to tank farm infrastructure and barrelled or finished stock, and is substantially higher than the 2013 Seddon earthquake. “This estimate excludes Business Interruption losses, as the impact of any inability to process Vintage 2017 is not yet known.” Daniel says insured losses have also increased due to the relatively recent reduction of earthquake excesses to 2.5%, having been at 5% after the 2013 event. The current issue of concern is the impact of processing availability for the upcoming vintage, he says. “Many
wineries were proactive and now have temporary processing solutions available, with insurers making progress payments until the final costs of permanent repairs or replacements are known.” The insured losses for an inability to process the vintage are hard to quantify at this stage, with vintage size an unknown and varying policy wordings when it comes to how Business Interruption claims trigger, says Dan. “These costs will become more apparent in the coming months. However, initial indications are good, due to a pro-active approach from the outset by the industry, supporting industries and insurers alike.” Dan says the current insured losses are manageable and the impact is likely to be on underwriting controls
Daniel Szegota
only, rather than those insurers that can currently underwrite wineries moving away from the industry. “Earthquake pricing may increase marginally but a more likely scenario is a return to 5% site excesses.” That said, the two large events within three years mean insurers will be expecting a proactive approach from the industry and tank manufacturers alike to help mitigate the main types of losses in the future, says Dan. “Should a similar event occur again in the foreseeable future, with a similar outcome, underwriting controls and even the availability of insurance could become a bigger issue.”
Earthquake Economics - Marlborough District Council Strategic Planning and Economic Development Manager Neil Henry: How much is the wine industry worth to Marlborough’s economy? It is worth $1.5 billion per annum, based on Marlborough’s 75% share of New Zealand’s wine industry. There are 2,240 wine jobs in Marlborough, about 10% of Marlborough’s total employment (NZIER 2015). What are the short-term implications of the earthquake in Marlborough, as you see them? The cost of repairing damaged tanks, and the potential impact on the 2017 vintage if there is a shortage of capacity. However, there will be a boost for those Marlborough companies involved in the repair. The industry has told us it can manage any issues, which is encouraging. Could this impact on the economic development of the region? The grapes must be grown here, but it is too early to say whether there will be a long-term impact on the
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winery side. A significant portion of the value of wine to our region is in its manufacturing. Many Marlborough businesses are connected to the wine industry in one way or another, and it has strong links to the visitor economy. The industry has invested heavily in Marlborough’s winery infrastructure, as they recognise the value in making wine here - from a quality, cost and brand perspective. Those values remain post-quake. How can the wine industry and local/ central Government counter this? The amazing success of the wine industry in Marlborough has been built on a strong partnership between the industry and local and central Government over a long period of time. The recent $10 million investment into the Research Institute of Viticulture and Oenology is the latest example of this enduring partnership. We all need to keep reinforcing the many benefits of keeping Marlborough at the centre of the New Zealand wine industry.