The wine industry should be in a celebratory mood following this year’s bumper harvest, one of the biggest on record. Yet behind the cellar door, the operating picture is far more equivocal: big crops, softer pricing, tough competition, surplus stock and a global consumer environment that feels, at best, “up and down”. At the same time, climate and operational risks are escalating in both frequency and severity, from ex-tropical cyclones and flash floods to hailstorms that can destroy a season’s income in minutes.
For insurers and brokers, this is not a niche concern. Wine is a flagship export for New Zealand worth $2 billion annually, with around 90% of production shipped offshore and heavily concentrated in a handful of major destinations. That exposure to external demand shocks collides directly with rising risk management and insurance costs at home. When margins are being squeezed by oversupply and discounting, every additional dollar of premium or investment in resilience is harder to justify – even as the loss potential grows.
The result is a classic insurance problem: operators most in need of robust cover and risk advice are often the least able – or willing – to fund it. Brokers report that the sector’s approach to core risk disciplines is still lagging the reality of its exposure.
On the ground, the risk picture has become far more complex than a simple “hail and frost” story.
“For vineyards, weather-related risks are typically among the most significant, but for the cellar doors, operational and liability risk often sit alongside climate risks in importance,” said Marliis Saan (pictured), a commercial broker with Rothbury Insurance Brokers.
That distinction matters for underwriters. Vineyard owners face capital-intensive, geographically fixed assets exposed to flood, windstorm, landslip and hail – perils that are trending both more frequent and more severe. Cellar doors, by contrast, carry a different blend: public liability, product liability, cyber exposure from online sales and booking systems and complex business interruption dependencies on tourism and hospitality demand.
At portfolio level, this creates a multifaceted accumulation problem. Insurers are simultaneously exposed to large-scale weather events impacting vines and infrastructure and to more conventional casualty, property and BI losses at the hospitality interface. In regions such as Hawke’s Bay and Marlborough, where production, tourism and processing facilities are tightly clustered, that concentration risk is acute.
One of the sharpest vulnerabilities highlighted by brokers is a persistent gap between actual reinstatement costs and the values presented to insurers.
“We often see the operators underestimate rebuild costs and also business interruption limits,” said Saan, who works with clients with cellar doors and vineyard operations. This pattern has only become more problematic as construction costs, labour, compliance and specialist equipment pricing have all climbed.
For underwriters, undervaluation undermines confidence in the risk. It raises questions about the insured’s financial resilience, the adequacy of BI indemnity periods and limits and the likelihood of disputes at claim time. For brokers, it is a classic advisory challenge: clients under extreme commercial pressure may be tempted to trim declared values or limits to keep premiums in check, inadvertently increasing their own balance sheet exposure.
In a sector already grappling with surplus wine, squeezed margins and uncertain export pricing, a major underinsured property or BI loss could be existential. That makes accurate valuations and realistic downtime scenarios – from replanting through to re-commissioning of processing lines – central to insurability, rather than administrative detail.
If valuations are one side of the equation, demonstrable risk controls are the other. This is one key to vineyards and cellar doors finding more affordable cover.
“When the operators can demonstrate robust risk controls and accurate valuations, then usually this can support more favourable underwriting outcomes, subject to insurer appetite,” said the Rothbury broker.
In practice, that means more than a generic risk survey. Underwriters increasingly want evidence of flood and hail mitigation strategies, maintenance regimes for critical plant, defensible asset protection plans, and robust health and safety and liability controls at cellar doors. Given the capital intensity of tanks, presses, temperature control systems and power infrastructure, documentation of inspection, testing and preventive maintenance is becoming a hygiene factor.
Moreover, as Saan explained, the information bar has clearly risen.
“Underwriters want more than a proposal form. They want to have a big picture of the whole business and how they operate,” she said.
For sophisticated insurers, that “big picture” links agronomy decisions, processing practices, storage and logistics, visitor management and export dependency into a coherent risk narrative. Operators who cannot articulate that narrative – or who rely on outdated sums insured and thin documentation – are likely to find capacity more expensive or constrained.
Beyond natural catastrophe and basic property risk, operational exposures in winemaking itself are often misunderstood. A critical example is fermentation. “During fermentation, temperature control is critical because you can lose your production if the temperature is not right,” said Saan.
However, she said despite this major operational risk, most material damage policies exclude losses caused by the production process, such as spoilage from temperature fluctuations, unless the damage results from a sudden external event, like equipment failure or a power surge.
This is one operational risk that calls out for careful broker attention and advice. In a sector facing a prolonged margin squeeze, that can be a dangerous blind spot. Without explicit extensions or specialist cover, many operators may be effectively self-insuring these scenarios – and may not realise it until a major loss crystallises.
For brokers, the opportunity – and responsibility – is clear: translate complex policy exclusions and sub-limits into operational language that vineyard managers and winemakers understand and align coverage structures with the realities of modern, export-driven production.
New Zealand wine has built a global brand on quality, consistency and disciplined execution, even as export markets soften and costs rise. The twin pressures of oversupply and escalating weather and operational risk will not ease quickly. In that environment, risk management and insurance are no longer secondary overheads to be trimmed when times are tight; they are competitive differentiators that can determine who survives the next major event.
For insurers and brokers willing to invest in sector-specific expertise – and for operators prepared to match that with robust controls, realistic valuations and transparent information – there is still a credible path to sustainable, insurable growth. For those who treat risk transfer as a commodity purchase, the double squeeze of weaker export economics and rising loss costs may prove far harder to escape.
