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Whisky Galore

This article recently appeared in the Scotsman 200.

Whisky Galore….

The remake of Whisky Galore is set to put the spirits industry firmly in the spotlight this year but for those with their nose on the malt money, it’s the leap in the value of collectibles malts that’s paying real dividends.

Prices for the top 1000 rarest single malt Scotch releases have risen by more than 175% since 2008 based on auction figures, according to Whisky Highland. Last year Bonhams sold the most expensive bottle of malt ever sold at auction in Scotland – a bottle of Glenfiddich going for £68,500 smashing the £25-£35k estimate. Even at the more conservative end of the market, a rare bottle can fetch many thousands of pounds.

As the valuation of rare whiskies rises, it’s important to consider insuring collections from fire, flood and whisky theft which is a very real threat for private whisky collectors, sellers and producers. Islay distillery Kilchoman had more than 250 bottles of a private single cask bottling worth over £38,000 stolen in March this year. Last year saw thieves steal over £14,000 worth of whisky from Perth and Kinross Distillery Tullibardine and a whisky enthusiast’s prized collection was stolen from his home in Renfrewshire.

Many might assume that a whisky collection will be covered under their general home contents policy. However, most household policies have low single article limits so they will not pay out on any claim for a single item that is worth more than on average £2,000 in value. Even then, the cover might not recognise the insurance needs that a private collection warrants.

It’s imperative that whisky enthusiasts get their collection valued by a specialist and that the stock inventory is kept up to date. This will help establish the amount that the collection needs to be insured for. Depending on the value of any individual bottle, the valuation may be needed in the event of loss or damage to quickly substantiate and evidence the value of those bottles that may be subject to a claim. This should enable a quick, un-quibbled settlement.

To ensure the necessary protection and preservation of a whisky or indeed wine, clocks, stamps or artwork collection, storage is essential. Keep bottles of whisky out of the sunlight and in a cool and dry place, up off the floor. Direct sunlight can result in the whisky lightening in colour and the labels fading. Often people store their whisky in a basement or cellar but these can be prone to flooding so it’s important that the collection is raised from floor level. If the labels come off the bottles (the most important single element of identification of a whisky bottle), the value is diminished.

The correct insurance provision will cover the cost to restore the label, plus any subsequent depreciation in value of the bottle(s) of whisky would be met. One insurer dealt with a claim where wine labels (although the same could apply to whisky) were eaten by snails that had crawled into the cellar. A standard household policy would not have paid out, since technically the product, the wine, wasn’t damaged.

If buying from auction or direct from a distillery, the whisky is automatically insured for up to 60 or 90 days from the point of purchase as long as the insurance broker is notified within that timescale and the appropriate additional premium is charged.

The policy wording is paramount here and there will be exclusions. It’s important that collectors and whisky enthusiasts ensure that specialist cover is employed for their collections. Remember that typically for whisky or wine collections, as soon as a bottle is opened, cover in respect of that bottle ceases so if it’s a rare one, best to keep it off the nose to keep on the money!

Whisky Maturation – Ensuring your stock is protected

Scotch Whisky is vital to the entire Scottish and UK economies. According to the Scotch Whisky Association the industry generated £5 billion in value last year alone, supporting more than 40,000 jobs and exporting £4 billion of Scotch annually to almost 200 markets. Exports of Single malt Scotch whisky also topped £1bn worth for the first time in 2016.

Fourteen new distilleries have opened since 2013 and a further eight are expected to start producing this year. In addition, there are forty distilleries at planning and development stage so the future for the industry remains strong.

Whisky Maturation Period

The whisky industry poses its own unique challenges due to the fact that whisky, after it has been distilled, must mature for longer periods – sometimes in excess of fifteen years.

In terms of the insurance impact of this lengthy distillation and maturation process, it is both impractical and costly to insure for this entire period. In addition to standard material damage cover, it is advisable to insure the product on a maturation basis that will cover both market value at the time of a potential loss and the loss of future matured value.

Put simply, if a warehouse stocked with whisky, which is set to mature for ten years, was destroyed by fire at the five-year point, the fire risk insurance policy would pay the five-year-old-whisky market value as at the date of the fire. The maturation wording would then pay the difference between that amount and the value of its intended selling price had it matured as a ten-year-old whisky. Thereby between the two sections, the distiller would be fully indemnified in respect of the loss of whisky in-store.

Whisky maturation - barrels

There is also a need to include a loss of output option in terms of business interruption should there be an insured event such as fire at the distillery.  This allows for a claim to be based on the gross profit loss arising from the reduction in output rather than a reduction in turnover. This is because the latter would not arise until the relevant maturity period.

It’s important that all distillery owners prioritise a ‘health check’ of their insurances. We at Bruce Stevenson Insurance Brokers offer this service free gratis.

Graeme Dempster is an Account Executive specialising in arranging insurance for Distilleries.  For further information please contact Graeme at [email protected] or call 07568 313 886

Insuring your Private Whisky collection

If you are fortunate enough to have a sizeable distinguished private whisky collection, you may want to consider insuring your investment.  The valuation of premium whisky has been on the increase in recent years.  A Scottish company that tracks the market, Whisky Highland, says prices for the 1,000 most-prized releases of single-malt Scotches have risen around 175% since 2008, based on auction figures*.   In October 2016, auction house Bonhams, in Edinburgh, sold the most expensive bottle of malt ever sold at auction in Scotland.  The rare bottle of Glenfiddich single malt whisky sold for £68,500 smashing the £25,000-£35,000 estimate.

Many might assume that their whisky collection will be insured under their general home contents policy.  However, many household policies have low single article limits, meaning that they will not pay any claim for a single item that is worth more than on average, £2,000 in value.  Even then, the cover might not recognise the insurance needs that a collection warrants.  Bruce Stevenson are specialists in private client insurance with access to household policies that happily accommodate high-value wine and whisky collections, or insurers who offer wine and whisky insurance in isolation with a specialist policy wording.

Private Whisky Collection – Insurance Advice

Below we detail some aspects that you need to consider:

Get it valued

The first and most important thing to do is to get your whisky collection valued by a specialist.  A good specialist will create a detailed inventory for you with photographs of every bottle.  Keep this inventory up to date, being sure to amend it when you buy or sell or even drink the contents!  This valuation will help you establish the amount you should be insuring your collection for.  Depending on the value of any individual bottle, the valuation may be needed in the event of loss or damage to quickly substantiate and evidence the value of those bottles that may be subject to a claim, enabling a quick, un-quibbled settlement.

Storing your whisky

To ensure the protection and preservation of any type of collection, be it artworks, clocks, stamps or whisky, you need to look after it properly. Store your bottles of whisky out of the sunlight and in a cool and dry place, up off the floor. Storing whisky in direct sunlight can result in the whisky lightening in colour and the labels fading.  Many people store their wine and whisky collection together, often in a basement or cellar.  These can be prone to flooding which is why it is important that the collection is raised from floor level.  A flooded cellar will make the labels come off the bottles (the most important single element of identification of a whisky bottle), diminishing their value.  However, with the correct insurance provision the cost to restore the label, plus any subsequent depreciation in value of the bottle(s) of whisky would be met. One insurer dealt with a claim where wine labels (although the same could apply to whisky) were eaten by snails that had crawled into the cellar.  A standard household policy would not have paid out, since technically the product, the wine, wasn’t damaged.

Worldwide cover

A specialist policy would ensure that your whisky is covered, no matter where it is.  You could have your collection at home or in a bonded warehouse.  If you are buying from auction or direct from a distillery, upon purchase, the whisky is automatically insured for up to 60 or 90 days as long you tell your insurance broker within that timescale and the appropriate additional premium is charged if applicable.

What is not covered

Always read the policy wording carefully.  There will be exclusions.  Typically for whisky or wine collections, as soon as a bottle is opened cover in respect of that bottle ceases.  In addition, loss or damage caused by inherent defect, wear and tear, gradual deterioration, insects, vermin, rust, corrosion, mildew, fungus, atmospheric or climatic conditions, or the action of light would not be covered. However, if damage was caused by extremes of temperature directly resulting from mechanical failure or breakdown of climate control units damaged by fire, lightning, a windstorm or an explosion for instance, cover would apply.

*WSJ June 2015

 For further information please contact – [email protected] or  [email protected]