Protecting your assets

  • Wednesday 14 December 2005

A surprising number of wine collections may be inadequately insured, finds ADAM LECHMERE

Suddenly wine futures are all the rage. A few years ago, en primeur was a phrase associated exclusively with Bordeaux, but there are quite a few wines today sold in barrel to investors.

Penfolds announced last spring that it would be selling the 2004 vintage of both its iconospheric Bin 60A Cabernet-Shiraz, and Block 42 Kalimna Cabernet, en primeur. And in September a clutch of young turks in the Barossa announced they would offer the latest vintage as futures.

That Australian wines can be a reliable investment requires a perception shift that the London auction scene, for example, is often unprepared to make. But the auction value of wines like Chris Ringland Shiraz has increased tenfold since their first release. The first vintage of the Ringland, for instance, released at AU$35 a bottle in 1995, is now fetching upwards of AU$350.

The Langton’s Classification of most-auctioned Australian wines (which started 15 years ago with 34 wines and now, in its 2005 incarnation, has 101) illustrates how the fine wine market is growing. It’s worth £500m a year in the UK, and a sizeable part of that goes straight into the cellar.

Investing in wine is bigger business than it has ever been – and yet, according to insurers, people often have no idea of the value of the wines in their homes.

Insurance company Chubb reports a 40% increase in the value of wine stocks held in the homes of its high-net-worth clients over the past five years. ‘But in 65% of the homes we appraise, homeowners have completely overlooked their wine as an item to insure,’ Chubb says.

The recent auction of the cellar of late MP Alan Clark highlights only one case among thousands, insurers say. Clark kept his bottles hidden behind mouldering wardrobes in the catacombs of Saltwood Castle. His collection has just fetched over £50,000 at Christie’s.

‘People tend to ignore the issue,’ says Robert Read of Hiscox Home Insurance. ‘They don’t correctly insure, or underinsure. The cellar can be a sort of blind spot. They show the appraiser art, silver and jewellery, but they inevitably forget about wine.’

While more and more wines are considered worthwhile investments, more people are keeping their wines at home. Cellars, which used to be damp, dark functional places full of winded sofas and mildewed record collections, are now ‘destination rooms’.

People want to show off their bottles, which demonstrates another aspect of insurance that is often overlooked: the difference a label (or a case) makes.

Just as the value of a first edition of a book plummets if the dust jacket is missing or damaged, a wine’s auction value depends on the condition of the bottle. Wine in ‘owc’ (auction catalogue shorthand for ‘own wooden case’) – can be worth up to 40% more than 12 bottles without a case or with damaged labels. From a buyer’s point of view this is common sense. Provenance – how and where a wine has been stored over the decades – is vitally important.

But insurers, says John Sims of Chubb, usually only cover actual damage, not diminution in value. If your house burns down and all the bottles are destroyed, you’ll be paid in full. But if your cellar floods and the labels are ruined but the bottles are intact, you’ll get next to nothing on a normal home insurance policy.

‘Most people are blissfully unaware that a standard policy won’t cover that sort of damage,’ says Sims. ‘It’s important to know you can insure for loss of value due to something like water damage.’

Sims advises that those with wine collections get the appraisers in, adding that due to fluctuations in the market value of wines, appraisal visits should be repeated regularly.

The advice comes with a caveat: you can’t insure against everything. ‘You can’t cover yourself for corked wine. That’s just one of the disappointments of life,’ says Hiscox’s Read.

And what about the reason that Alan Clark hid all his best wines – the fear that his teenage children would ransack the collection during a party? Unfortunately, that too would be classed as one of life’s disappointments, and is uninsurable.

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