Wool is a great insulator in wet conditions, as it continues to provide warmth and insulation even when soaked. Wet wool does emit an odor that some people find unpleasant, however.
Since wool is a natural insulator that protects animals who spend their lives outside in the wild, by design, it stands up well to rain. The water resistance is dependent on whether the wool has been treated or not, however. The more untreated it is, the better it resists water.
Wool quality also varies by animal. Wool that is soaked should be treated carefully, as stretching can easily cause permanent marks, and wet wool should not be dried with intense heat, as it shrinks.