Insuring weird and wonderful high-net-worth items

Getting insurance for your household contents and motor vehicles is prettystandard procedure these days.However, how does one go aboutinsuring a Coca-Cola memorabiliacollection worth about R750 000,or a brand new Rolls Royce thatwas bought for R12m, then sent forbespoke personalisation in Italy,resulting in the car arrivingin South Africa worthabout R25m?

Tarina Vlok,General Managerat Elite RiskAcceptances – asubsidiary of OldMutual Insure thatprovides bespokeshort-term insurancesolutions to highnet-worthindividuals– says they have a panelof specialists that are able toconduct valuations of these weirdand wonderful items.

“The benefit of getting expertsto conduct this type of valueassessment is that they have noemotional connection to the bespokeitem or collection, and can thereforeassess the items from a purelyreplacement-value perspective,” sheexplains, adding that, often, thesecollections cannot be replaced, inwhich case the replacement valuehas to be agreed upon.

Over time, the appreciation valueof most of these items is usuallyclosely related to the exchange rate,she says. “Professional valuators consider this volatility when assessing the value. However, any addition to a collection or modification to a bespoke item will clearly have an impact beyond exchange rate fluctuations, and it is therefore recommended that these valuations are done every two years to ensure your collection is correctly valued. “If there has been no addition, the original valuator will probably do a desktop revaluation based on rarity, supply and demand, exchange rate and exclusivity. With new additions, they prefer to do a new valuation.” These valuable items often carry specific storage and care requirements when being insured. “Many valuable collectibles and memorabilia – particularly fragile items such as old books or even designer clothing – may require temperature-controlled storage areas with controlled airflow and lighting.

“In the case of looking after custom-made cars, clients will usually have structured and regular engagements with the vehicle manufacturers and/or distributors to ensure that the engines remain in good running condition. It also follows that these vehicles are not driven that regularly and are collected purely for the joy of the collection.”

Vlok says that when it comes to valuable collectibles and memorabilia, the most common pitfalls remain underinsurance or not insuring the items at all.

“This is often because people have no intention to ever replace these items – perhaps because their real value may be more sentimental than financial – or they are completely unaware that such items aren’t automatically included in a normal home contents policy.

“Nevertheless, failing to insure these items properly will result in substantial financial loss should something happen to them. Furthermore, if the items are not specifically excluded from the contents sum insured, it may result in underinsurance, which could lead to the reduction of settlement amounts on claims.”

Most importantly, however, Vlok highlights the need for specialist cover when it comes to insuring these weird and wonderful collectibles and memorabilia. “Given the high values at risk, their complexity, and the need for a bespoke service, insurance for these high-value items is far removed from the high-volume personal lines market. This is one of the many reasons why specialist underwriters and brokers are required to effectively service the unique needs of the high-end market,” she adds.

First published in MoneyMarketing, April 2019