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Luxury Investment Market Trends

20 June 2024 Aon South Africa
Ann Cloete

Ann Cloete

In the dynamic landscape of luxury investments such as art, jewellery, coins, designer apparel, classic cars and the like, staying abreast of market trends has never been more imperative. As the allure of these high-end assets continues to captivate discerning investors, the role of risk knowledge becomes increasingly pivotal in navigating this exclusive realm. Selecting the right luxury investment demands a nuanced understanding of evolving market dynamics, emerging sectors and potential risks. Equally significant is the strategic consideration of safeguarding and insuring these valuable assets, which can profoundly impact the trajectory of one's portfolio and its preservation.

According to the latest wealth report by Knight Frank (1) on the luxury investment market, the following markets experienced growth in 2023 with record-breaking examples of high-end purchases:

• The value of art has increased by 11%, with Femme à la montre by Picasso selling for US$139.4m.
• Jewellery’s value has grown by 8%, with the purchase of a Bleu Royal ring featuring a 17.61-carat vivid blue diamond for US$43.8m.
• The market for luxury watches rose by 5%, with a Patek Philippe Ref 2523J gold two-crown world-time wristwatch selling for US$8.5m.
• The value of coins increased by 4%, with a 1795 US$10 Capped Bust Gold Eagle 9 Leaves coin selling for US$2.7m.

According to Ann Cloete from insurance brokerage and risk advisors Aon South Africa, insuring high-value investment pieces such as art and collectables goes beyond conventional coverage. The realm of insurance for collectables is highly specialised, offering customised coverage tailored to the unique nature of investment pieces.

In most cases, prestige collections are unique and cannot be replaced, which lends itself to a different set of criteria when it comes to assessing the insurable value of these items. The value of a collectable item is determined by among other things the provenance and history of ownership, condition of the object, the value of pairs and sets, trends in the market, the size of the collection and the name of the artist.

“Given the complexity around correctly scoped insurance covers for these appreciating assets - art, antiques and collectables are insured on an agreed value. It is necessary to enlist the proficiency of an expert in the field to assess the value of the collectable items in order to determine the necessary sum insured. This ensures accurate evaluation and effective management of both the value of the art and any associated claims,” Ann explains.

Safeguarding against loss or damage of these priceless assets starts with being better informed about the risks that a collector is faced with.

“In the unfortunate event of damage, owners may choose to have the piece repaired, but it's crucial to understand the resulting loss of value. Similarly, the theft of a collectable item, often perpetrated by professional syndicates, makes it imperative to have a solid insurance plan. In case of theft, the stolen item will be listed on theft registers to hinder resale. Owners should also verify if their items are insured for a defective title, protecting against scenarios where stolen items are purchased by an unsuspecting buyer, potentially leaving the owner with a considerable loss,” she adds.

“Working with a specialist insurer and broker with expertise in managing the complexities of value, loss and repair is absolutely essential to protect the value of your luxury investment,” Ann concludes.

(1) Wealth Report, p65 https://www.knightfrank.com/wealthreport

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