Somewhere in the world, a wealthy collector nerd is holding in his perspiring paws a Spiderman comic book worth more than half a million rand ($37 052). Also in existence is a 200+-year-old bottle of Château Lafite that costs a cool R2 million ($148 209). Then there’s the last album released by John Lennon, Double Fantasy, the last to be signed by the late Beatles band member before his untimely demise, which is said to fetch more than R5 million ($370 524).

People collect all kinds of stuff: artwork, wines, vehicles, matchbox-sized vehicles, creepy dolls … most of it worthless, some of it worth millions. Sidestepping the debate around how value is appraised to a 200-year-old bottle of wine better suited for use as paint stripper than consumption, the appraisal of these collectibles is fascinating stuff. It turns out it’s quite a complicated process with numerous tick-box exercises, particularly with the restoration and insurance of these items.

Those who have visited the King Price offices in Johannesburg may know of CEO Gideon Galloway’s matchbox car collection behind glass panels in his office. Admittedly, he collects many toys, “I love toys,” he says, which includes a rather impressive collection of bobbleheads and superhero figurines. His fascination with these collectibles began with the idea to add flare to the offices of the previous companies he worked with. This led to him buying a collection of 20 matchbox cars at an auction, which he displayed in his office. He then bought some more. The most he ever paid for one of these was R8 000 ($592) for a Jaguar of which make he’s unsure.

He won’t ever be accused of being sentimental. “I took many of these cars out of the boxes so people could view them, and the kids also play with them,” he says. Some of the more precious ones he’s kept away from prying hands. The value of these little matchbox vehicles is still unknown to him, but he’s spent about R100 000 ($7 410) over the years. The crucial one that’s missing is the Ghostbuster vehicle that he spotted once in a hobby store and keeps going to back to buy but never does: his Holy Grail of matchbox vehicles. It goes for about R20 000 ($1 482), and if he sees it again, consider it bought, he declares.

Chairman of ITOO and founder of Pablo Clark Racing Paolo Cavalieri collects somewhat larger vehicles and has in his fleet of classic racing cars a Ford Galaxie, a BMW 745 and a Ferrari 250M, among others. He says the biggest challenge with classic vehicles is finding the correct parts, valuation and knowledgable repairers. Insurance companies have some idea of the valuation of these vehicles, he explains, but makes specific mention of Johannesburg-based Sela Brokers, which specialises in the insurance of Porsche and Ferrari vehicles, among other collectible cars.

Brokers must consider the true cost of repair when seeking out a policy and the frequency of use; the storage costs of these vehicles is also an important consideration when looking for the correct insurance policy. It lends itself to a different set of criteria than other insurables, explains Mandy Barrett, personal lines marketing manager at Aon.

Unique or rare items pose an insurance conundrum, says Joe Szemerei, executive director at Indwe Risk Services, “if a piece is damaged but restorable, it may lose a large percentage of its value; if a piece is stolen or totally damaged, it may be a one of a kind and irreplaceable”.

To evaluate your new Range Rover, an insurer can simply ascertain market value as set out by the Auto Dealers’ Guide but it is an altogether different story to insure a 1958 MG A Roadster, for instance. The market for these vehicles is relatively small and most likely not very active, explains Dawie Loots, CEO of MUA Insurance Acceptances. The onus thus lies with the insured in consulting with the broker and insurer to determine the correct value. Cavalieri stresses that the broker and insurer be on the same page at this stage of setting up the policy. The value is calculated on scarcity and desirability, and where there would be a decrease in value for ‘conventional’ vehicles, these specialised vehicles often appreciate in value over time. “It is useful to think of it as an investment and thus there is a need for protection and insurance,” Loots warns.

“These types of vehicles should ideally be insured for the agreed value as there are no retail values available,” adds Hannes Smith, head of personal lines sales and operations at Old Mutual Insure. Each vehicle is unique and, in many cases, it may be impossible to replace due to the special parts needed, explains Smith. “It would be difficult to place the policyholder in the same, or similar, position they were in prior to any loss,” he says.

These vehicles then also have different risks to other vehicles. While these cars spend less time on the road, they are fitted with old    technology, which exposes owners to a host of other risks. “Engines might be fickle and can quickly overheat,” explains Loots, and insurers may insist on fire extinguishers in the vehicle. A specialised broker is your best friend in this instance; one who knows the various   products and understands the extent of cover with the accompanied exclusions on these policies.

As Cavalieri of Pablo Clark said earlier, many insurers find it daunting to find a suitable repairer due to the specialised nature of the repair work. The work can be costly and must often be imported, which may lead to delays in claims and the repair processes. “It can be as frustrating for the customer as for the insurer,” adds Loots. Paperwork is another unassuming itch, he says. This includes details on the origin and registration of the vehicles, and in some cases, special permits are required for imports. “Valuation certificates are required from a specialist dealer at least every two years,” stresses Barrett.

Artworks, antiques, vintage cars and sculptures don’t spring to mind when thinking of cargo insurance, but shipping a vintage car, for example, would require a pre-shipment survey of the vehicle by a vintage car specialist, explains Dominique Potgieter, director at Marine Underwriting Managers. A valuation certificate would also be necessary. Considerations for the storage of the vehicle include supervised loading and offloading; the method of shipment; if it will be stored on deck or under deck; the option of shrink-wrap protection; and the availability of spares and prospects of repairs in the destination country. “Each risk is considered on its own merits, however, we do advocate that these items are best insured in a specialist market,” she says.

Same same but different

Artwork is appraised on more or less the same criteria as classic vehicles and many other collectibles – condition and market trends – but other factors also include the values of pairs and sets, and the size of the collection. Szemerei of Indwe says valuations of collectibles should be done every three years because of the volatility in the values of certain collectibles.

Barrett of Aon adds that a specialist insurer like Artinsure Underwriting Managers is equipped to deal with these intricate cases. “Artinsure leverages off expert valuers across the globe who are supported by a substantial information network, which         enables it to professionally manage the insurance needs of an appreciating asset,” she explains. The recent appreciation of South African artwork is a boon for artists and investors, but with great value comes an exponential increase in risk. “As [investors] start to use these investments as diversification plans for their wealth management, so the need for specialist insurance has increased,” warns Szemerei.

Yes, theft will always be a risk but the major risks to investors of art are not as the movies would have it. Accidental damage and fire damage sit at the top, with theft in third; it’s more a case of Rowan Atkinson’s Mr Bean than Pierce Brosnan’s The Thomas Crown Affair. However, when theft does come into play, it’s likely the work of professional syndicates.

To try and mitigate this loss, there are various theft registers where stolen items can be recorded at the time of loss to manage the resale of stolen items, but it has limited results, explains Barrett. “Cover for these items extends to safe care in the event of a fire, when items will be removed for safekeeping and the cost of transportation and safekeeping is normally covered,” she adds.

Understanding the nature of the collectible is essential, explains Szemerei of Indwe. In some cases, it may be best to consider a mix of self-insurance and insurance for the client, depending on the nature of the risk and item. Start by looking at the potential catastrophic risk to a collector and what the client would need in case of a total loss. Based on their response, a broker can then begin to build a suitable cover structure.

It is also very important the broker understands the type of natural risks particularly pertinent to certain collectible types, such as moth and vermin, temperature and oxidisation effects, chemical spillage, pollution, humidity, smoke damage without fire damage, dampness, as well as some of the unnatural (and sometimes uninsurable) non-natural risks. These include a proliferation of forgeries, theft, accidental damage caused by human error, riot, strikes and public disorder, theft by employees, accidental loss or damage while in transit or temporary storage.

There are a myriad other issues the specialist broker would, or should, be aware of, explains Szemerei, even though they may not appear on the policy form. “The skilled broker will know and understand what needs to be disclosed to an insurer,” he adds. The insured should, for example, ensure that all their tax affairs are in order and there are no disputes regarding capital gains or value-added tax that may arise. The prior loss should also be disclosed, whether claimed for or not. Szemerei warns that with fine art insurance, or any other specie cover, it is unwise to keep shopping the portfolio all over the market, as non-disclosure of material facts is always highest at the beginning of a client/insurer relationship, which    decreases over time as insurers fully understand the risk they are underwriting.

Insuring the high net worth and upper-middle market exposes Indwe to specific client requests, but the company also insures the collections of local authorities, education institutions and corporates, “some of whom have amazing art and library collections”, says Szemerei. These premier collections can easily be worth anywhere between R50 million ($3.7 million) and R100 million ($7.4 million). South African artists, such as Irma Stern and Jacobus Hendrik (JH) Pierneef, have recently started attracting record prices of up to R20 million ($1.5 million) for a single piece.

Absa hosts the largest corporate art collection in Africa, explains Bongani Khulu, head of family office and client engagement at Barclays Africa. It also has the biggest coin and note collection in South Africa. Together, these collections constitute around 20 000 pieces. “These fine works of art, which range from JH Pierneef to Gerard Sekoto paintings, can become an inspiration for investment forays,” he says.

Even wine collections in South Africa can fetch many millions of rands, notes Szemerei of Indwe. “Often, avid wine collectors tend to be collectors of fine art, antiques and other collectibles,” he adds.

The price of your most prized bottle is not something you simply divulge to your partner, says Wayne Visser, founder of Great Domaines, an importer and distributor of top-shelf wines. “My wife might read this article and then the cat is out of the bag,” he jokes, “but as I collect wine to mature and share with good friends, the price becomes irrelevant.” His company handles vintages from Domaine de la Romanée-Conti’s vineyard; a separate appellation called Romanée-Conti; and Petrus, two of the most expensive red wines in the world. A bottle of Romanée-Conti can go under the hammer for $10 000 (R134 943) to $20 000 (R269 887) and Petrus will fetch between $2 000 (R26 988) and $3 000 (R40 483). The price depends on where you can find the wine and on the provenance. “Older vintages of these wines produced in good years can easily fetch double the current prices,” says Visser. And yes, they insure from point of collection to the point of delivery to customer.

There is an argument to be made for the cost relationship between producing top quality wines and the price for which it is sold, but in the above cases supply and demand is the ultimate arbiter of price, notes Visser. Price and value may be different, but value is determined by the market with the base entry cost set by the producers.

These great wines are characterised by an impeccable track record of improvement with age, as well as complete commitment by owners to spend whatever is necessary to maintain the health of soils, hygiene in the cellars and vineyard management in pursuing the continuation of this track record, explains Visser. These wines often have a long history and are rare due to limited production. “The demand vastly outstrips supply without any possibility of this changing,” he adds.

On Visser’s wish list is “any top red burgundy” (Pinot Noir) made in 1945, a vintage rich in taste and steeped in mystery. These wines were made as World War 2 came to a halt, and in most cases the producers have no idea who the winemakers were, seeing that most of the vineyard labourers had yet to be demobilised from the army. “The results have been magnificent, as if the wine gods conspired to produce a harvest in celebration of peace.”

For investors who want a taste, so to speak, the South African market is a favourable one because of its relatively small size. “The South African prices for these great wines have to be very fair or they wouldn’t sell,” explains Visser.

The Africa Wealth Report 2017, issued by AfrAsia Bank, notes collectibles, especially art, wine and classic cars, are growing at a rapid rate: 1.1% of total assets of high net worth individuals in Africa in 2016, almost double from 0.6% a decade ago. By far the hottest trend is investing in collectible items, although this investment class, while fast-growing, is still emerging across Africa, according to the report. Brokers and insurers can drink to that.