As we discussed recently when we covered the growing trend in cryptocurrency insurance, where there are booms (and busts), there are going to be boom-derivatives to profit off of. The high-end whiskey market is no different, and with the rarest whiskeys sometimes costing millions of dollars, insurance on these rare liquors is becoming a booming business, according to a Bloomberg article.
Ron Fiamma, head of global collections at AIG - best known for selling CDS ten years ago and now even better known for selling whiskey insurance - said that "whiskey collectors now number in the many hundreds, closing in on 1,000 individual collectors of all stripes and values. When auction houses are holding two or three whiskey auctions a year, with some whisky going for a million or half a million dollars, clearly it warranted attention."
For proof, look no further than a 60-year-old Macallan whiskey which recently sold at auction for about $1 million in London and another Macallan that was produced in an ex-sherry oak cask that sold for $1.5 million. Both of these selling prices were twice above their high estimates.
Surpassing the return of the stock market, rare whiskeys have appreciated 140% over the last half decade according to the Vintage 50 Index compiled by Rare Whisky 101. As a result, AIG has seen a nearly ten-fold increase in applications for whiskey insurance year-over-year.
Not only is this a sign of a boom in the whiskey industry, it’s a sign of the changing landscape of alternative investments. As we noted last year, art and jewelry both continue to be popular – with both topping the list of insured collectibles at AIG currently. Watches, cars and whiskey are also moving closer to the top of the list as days go by.
Fiamma commented on this conspicuous consumption as follows: “The 90-year-old may leave a beautiful silverware collection or maybe some jewelry. The 50- or 60-year-old children are divesting themselves of those assets and purchasing whiskey, beautiful watches, Ferraris. We get to see that internally as they move from one policy to the next. It’s a fascinating look at the transfer of wealth on the collection side.”
Which is why watch policies are increasing at a clip of about 20% year-over-year. Vintage automobiles, in comparison, are trending higher by about 15% year-over-year. Fiamma says that the younger generation is attracted to collectible watches as the price points are a little bit lower. Rolex, Omega and IWC are three brands noted as sought after collectibles.
He continued: "They’re fun. You can use them, look at them, carry them with you."
The collectible vehicle industry has also noticed its demographic getting younger. This year was the first that business from millennials and Generation X was more than business from baby boomers.
Jonathan Klinger, vice president of public relations at car insurer Hagerty, said "a few years ago when this started, it was first-generation Broncos and Toyota Land Cruisers that were popular. As interest has grown [in those vehicles], the values go up. And as more people have gotten priced out, the interest has grown in the 1980s or 1990s variances of those vehicles.”
Staying up-to-date on the value of your collectibles is extremely important, according to a spokesman from AIG. Insurance coverage is often tailored specifically to meet the value of products and is constantly reworked and re-watched according to the dynamic value of whatever the object in question is.
"In the whiskey sector it’s about constantly following sales," noted Fiamma.
Generally, for spirits, the rule of thumb is to check your collection every 3 to 5 years. However, everything is done on a case-by-case basis with insurers.
He concluded: "While obviously everything we insure is important to our clients—homes, cars—it’s the collections that they are overwhelmingly passionate about. These are often things that they spend their lives accumulating, curating, and selecting. There’s a tremendous amount of emotional attachment to them."
We'll drink to that.