A bottle of the “world’s most valuable” whisky sold for $2.7 million at Sotheby’s on November 18. The Macallan Valerio Adami 1926 is one of just 40 bottles filled in 1986 after the liquor aged for six decades in sherry casks, making it the oldest Macallan vintage ever made, Forbes reported.
Another version of the single-malt whisky, which Sotheby’s classified as the “most sought-after” Scotch whisky, sold for a record-setting $1.9 million in 2019, according to the auction house.
Featured Solutions
Some investors may see it as one way to protect their portfolios against inflation and an unstable market, Moneywise noted in a September report on the growing trend of whisky investing. Like other high-value collectibles, these investments should be protected with a Personal Articles Floater, a type of insurance policy for valuable items that would usually not be adequately covered by Homeowners Insurance, said Sarah Chandonnet, Underwriting Director, Private Client, Burns & Wilcox, Detroit/Farmington Hills, Michigan.
Whisky collections are becoming a part of a lot of individuals’ investment portfolios.
“For a lot of these investors, this is their passion,” she said. “They know their whisky, and the fact that they are willing to invest so much means they really need to protect their investment.”
Whisky collecting on the rise
In the U.S., total whisky sales reached $12.5 billion in 2022, up 5.9% from the year before, Sip Outsider reported in February. In Canada, demand for Canadian whisky was estimated to grow at a compound annual growth rate of 3.6% between 2021 and 2025, and its market price has been on the rise since 2018, according to an August 2022 report from analytics provider Beroe, Inc.
They know their whisky, and the fact that they are willing to invest so much means they really need to protect their investment.
American whisky sales have grown steadily over the past 10 years across different price categories, but “super-premium” whisky sales began picking up considerably around 2016, the New York Times reported in December of 2022. High-value whisky collections, McCarty said, have become “just like fine art or watches.”
“Individuals are making major investments in their lives, and whisky is the same thing now,” he said.
Even without the boost that collections received during the pandemic, “collecting on its own has grown,” according to Chandonnet. “There are fewer investors coming to the market, and a lot of these folks that are investing in these larger-ticket items are younger, newer investors,” including many millennials, she said. In fact, auction houses have focused on this demographic, the Single Malt Shop wrote this year in a report on millennials and whisky collecting.
Also known as Inland Marine Insurance, a Personal Articles Floater can cover physical losses to high-value items due to fire, severe weather, theft, breakage, and more. “Theft is obviously a major threat,” McCarty said. “A lot of individuals, when they buy new whiskies, they post them on social media and that sort of thing — that is a concern now,” as the attention also increases the risk for theft, he said.
Collections not covered on other policies
Whether an individual purchases a single high-value whisky bottle or amasses an entire collection, a Personal Articles Floater should be sought out from the first acquisition. The same principle applies to other collectibles, such as sports memorabilia, sneakers, jewelry or artwork. “If a loss were to occur without a Personal Articles Floater in place, your Homeowners Insurance policy has limitations for induvial items, and it’s important to review your policy and know these limits. Most Homeowners policies won’t cover a large single item,” McCarty said.
“When considering items valued at $2,000 or more, I recommend obtaining a Personal Articles Floater, even for a single item, to ensure proper coverage,” he said. “Any item in your household worth significant value to you should have one.”
However, some individuals may assume that wine and spirits are not insurable, McCarty added. “That is probably the biggest misconception,” he said, adding that both renters and homeowners should have this type of policy for their collections. “I think a lot of individuals do not realize the importance of insurance and that they can insure it. The individual items should always be on their own when they are worth that type of money, and it should be updated as you make more purchases.”
Chandonnet agreed, saying newer collectors may believe their Homeowners Insurance will provide coverage for a small collection when it will not. “There is no collection too big or small,” she said. “Typically, if the client is purchasing one bottle, there are going to be 50 within the next year or three years. Protect your investment as soon as possible.”
Collectors can also ask their insurance broker about endorsements for increases in value and other considerations that may be applicable to whisky collections, Chandonnet said.
“If the bottle increases in value significantly, the policy can cover that market appreciation,” she said. “Those are the types of things that these investors or collectors are spending a lot of money on. These are their personal passion projects. They are meticulous with pride in ownership, and they are always looking for the next big sale. Partnering with the right insurance broker to make sure they are educated on the necessity of this policy is really very important.”
‘Proactive risk mitigation’ encouraged for collectors
High-value collections of any kind can be at risk for theft. In September, two suspects were arrested after allegedly stealing $3 million in jewelry from a home in Frederick County, Maryland, WMAR reported. Expensive liquor bottles have also been targeted in residential and commercial incidents, including a 2020 liquor store theft in Richmond, British Columbia, of two bottles of whisky worth $80,000, Global News reported at the time.
They know their whisky, and the fact that they are willing to invest so much means they really need to protect their investment.
Social media use can increase this risk, particularly if collectors do not have privacy controls on content. “Anytime you are advertising new purchases of luxury items or goods on social media, that can definitely increase the risk of theft,” Chandonnet explained. “With the world we are in right now, nothing is private. The well-managed client will be very intentional with how they are posting on social media, they will take risk mitigation seriously, and they will have the right experts in place to advise them.”
A central station fire and burglar alarm may be recommended by an insurance carrier when purchasing a Personal Articles Floater. The carrier may also inquire about how collectables are stored and what risk mitigation steps are being taken to protect them. “Things that we really look at are whether this is a newer investor or is there a collection, and are there proper protections in the home. Does the client take risk mitigation seriously?” Chandonnet said. “How are the bottles stored? Is there a climate-controlled space or room dedicated to the item or collection?”
You do not want to assume anything with insurance, especially with a Personal Articles Floater. It’s important to have a clear understanding of your policy.
While different protective measures can be taken depending on the collections involved, “proactive risk mitigation is very important, especially when clients are collecting luxury items like wine and spirits,” Chandonnet said.
As with all aspects of investing, “you want to do your research,” McCarty added. “Put everything on the table, and do not assume anything when you are having these discussions,” he said. “You do not want to assume anything with insurance, especially with a Personal Articles Floater. It’s important to have a clear understanding of your policy.”
