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Recurring Fires Raise Insurance Worries

by Andrew Adams
November 03, 2020

After years of devasting wildfires in Northern California, fully insuring a home, winery or other commercial building located in areas prone to fire is likely to become more expensive at best and impossible at worse.

“We’ve got a lot of issues we need to deal with, but my biggest concern is what are these insurance companies going to do in these high-risk areas,” said California state Sen. Bill Dodd (D-Napa). “This is something that is an extreme concern.”

Dodd, who is running against fellow Napa resident and Republican Carlos Santamaria for reelection in the 3rd State Senate District, was the keynote speaker of the North Bay Business Journal’s Impact Napa virtual conference held Friday, Oct. 30.

He said the state and insurance commissioners need to find a balance between keeping rates low yet maintaining a base of coverage large enough that can fund future fire losses. Dodd said it’s vital for all parties to find a path forward so wineries, hotels and homes located in the wildland urban interface, or WUI, can still secure adequate insurance protection. “Frankly at the end of the day we’re going to need all of your help in this regard,” he said. “We want to make sure they don’t leave the marketplace like with earthquakes or hurricanes.”

After the 2017 fires, Dodd said state legislators were able to expand the maximum level of coverage through the FAIR Plan, or last-resort insurance, from $1.5 million to $3 million. Dodd admitted such coverage likely means paying more and getting less but “it’s better than nothing.”

He credited groups such as Napa Communities Firewise Foundation, NCFF, for taking the lead on a local level to reduce fuels and increase fire safety and prevention knowledge. Such groups could form the basis for fire protection districts supported by local taxes that in turn could leverage bond financing to provide even more immediate funding for fire prevention work.

Such districts could also help keep those rural areas covered by insurance providers. “That may be an answer to insurance companies being willing to make coverages in those areas,” he said.

Tourism, economic recoveries continue

The recent fires and smoke where just another of this year’s “layers of crisis” that Linsey Gallagher and her staff have had to contend with at Visit Napa Valley. During a panel discussion following Dodd’s remarks, she said after the initial shutdowns of the pandemic, August wildfires, smoke from other fires and then the Glass Fire “we are certainly a little bit bruised and a little bit wounded.”

But she said she fully expects Napa Valley to land back on its feet and the travel and tourism industry to be back to normal as soon as possible pumping more than $85 million into the local economy and employing more than 16,000 people.

The group adjusted its messaging in step with the various stages of the pandemic and currently is focused on encouraging people within driving distance to enjoy Napa’s currently smoke-free skis with their immediate family or other small “pod” of people they feel safe with. “You can have that iconic and luxury Napa Valley experience but in a smaller format as we navigate through this pandemic.”

Emma Swain, CEO of St. Supréy winery in Napa Valley and Jean Charles Boisset who owns wineries in Napa and Sonoma counties both gave presentations on their companies’ efforts in digital outreach during the pandemic.

Swain said her team found success bringing the winery’s culinary program online as that has seen tremendous web traffic among consumers staying and cooking at home, while Boisset employed his own charisma and celebrity friendships to produce a variety of digital content. Both said their efforts have been well received with existing, and new, customers. “What we’ve realized is we have a whole team of ambassadors that is growing exponentially when we do home virtual tastings,” Boisset said.

Gallagher said hotel occupancy dropped to a low of about 10% in April and May but has steadily risen back to about 50% of normal. Typically, Napa is 80% to 90% booked this time of year. A similar trend has been seen in Sonoma County, which was the focus of a separate virtual Impact conference the day prior.

During that session, Dr. Robert Eyler, an economics professor at Sonoma State University, said it may not be until 2023 when the U.S. economy is back to where it was prior to the pandemic. Eyler said he has been encouraged by the decline in new unemployment insurance claims.

What’s less encouraging is that, according to federal labor data, the number of permanent job losses has begun to creep up as workers who were furloughed in the spring and summer may now be finding themselves out of work for good. “That means we may have a lingering recession,” he said.

While manufacturing and construction have seen minimal job losses and some gains, retail and the service industries led by the leisure and hospitality sectors have seen significant job losses. As the number of COVID-19 cases spike throughout the U.S., these sectors could see more job losses. He described the pain here as a “structural threat” to the recovery if independent retail, restaurants, theaters and entertainment venues and personal services such as nail salons can’t recover and are forced to close.

A significant percentage of the labor pool may also have given up on employment to take care of children who either can’t go to daycare or are staying home for distance education.

One bright light of the economy has been home sales. Eyler said the Bay Area has seen home prices steadily increase this year and those gains will likely continue. Demand has also kept right on pace too. There has not been much “panic selling,” which could depress prices but that may change if some homeowners — without hope of an additional stimulus check or additional unemployment benefits — may have to sell because they are unable to make mortgage payments.

Based on hotel occupancy rates, Eyler said tourism in Sonoma County also was rebounding but were disrupted by the recent wildfires. If the pandemic doesn’t interfere with tourism getting back to normal it will play a key role in a wider economic recovery. “We seem to be on the right track,” Eyler said, “we just need to keep the momentum going.” 

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