Here’s something that you probably didn’t know:
Asia is now such a powerfully driving force in the marketplace for fine wine, that American collectors have lately been forced to bid bid in Hong Kong for the wines they they really want. Which means that more and more rare fine wine is on the move (and therefore vulnerable), both from Europe and California to Hong Kong, then back to the U.S. when (or if) those American collectors score the winning bid.
That’s just one of the insights that you might glean from our latest interview, which comes to us from an area of the wine world that, like some kind of mysterious dark matter, is seldom-if-ever-seen but exerts a potentially huge influence on the universe of wine wine world. This strange influencer? The world of fine wine collection and investment.
Few people know how to navigate this mysterious world as well as today’s interview guest: Katja Zigerlig, who is AVP of Fine Arts, Wine and Jewelry Insurance for the Private Client Group division of Chartis. In her role, she oversees the strategic growth of the “private collections” insurance portfolio for Private Client Group. Much of her time is spent advising those clients on shipping wine around the world, inventory management and proper cellar management – exposing her to what are likely some of the largest and most expensive private wine collections on Earth.
Ms. Zigerlig has almost two decades of professional experience in the world of collectible art and wine. Prior to joining Private Client Group in 2004, she insured private art and wine collections, museums, galleries and exhibitions for AXA Art Insurance Company. She has a B.A. and M.A. in art history, specializing in twentieth century art (Dude’s personal favorite period), but her experience with fine wine comes via viticulture study at UCLA, and extensively touring Napa and Sonoma wineries. Ms. Zigerlig has gone on to teach courses on wine collecting, and you can find her quoted in recent CNBC and New York Times articles on art and wine collecting.
Ms. Zigerlig is also a good sport, as you’ll soon see in her answers to some of the more colorful questions that I posed to her (you know me… can’t take me anywhere, really…), and she has a thing or two to tell you about protecting your own budding collections.
Anyway, enjoy this rare glimpse into the world of rare wines!…
1WD: Tell our readers a bit about who you are and what you do. What’s a typical day like in the life of someone who has to keep close tabs on wine collections?
Katja Zigerlig: Wine is one of the “collectibles” that I focus on, in addition to art and jewelry. I spend a lot of my time educating the public, collectors, wealth advisors and even wine consultants on the importance of insurance as an asset preservation strategy. I also work closely with my colleagues to review the latest inventory management software, review transit protocols for wine shipments from one location to another and follow the trends in the wine market that affect our clients — from wine prices to wine fraud.
1WD: Do you have any formal experience with wine, or have you had to learn things ‘on the fly’ during your work for Chartis?
KZ: I’ve been drinking wine since the age of 14 (having European parents they felt very strongly about weaning me off milk as soon as possible). For the academic education, I handled Napa and Sonoma as my business territory and took wine classes at UCLA. But drinking and enjoying wine is the easy part. The learning curve has to do more with understanding how susceptible wine is to damage and how we can best help our clients avoid loss. The best security systems for wine cellars, how to stop mold growth in cellars and finding the best way to transport wine from Bordeaux to Denver is what I’ve dealt with in my work life.
1WD: How obnoxiously large and expensive are the wine collections that you’re dealing with on a regular basis? Is there an average size and worth that you typically see in the collections for your clients?
KZ: Can having a lot of good wine ever be obnoxious? Seriously though, our smallest collection is about $10,000 and our largest is over $20 million. Yet both small and large collections are vulnerable to the same perils, so we are interested in how the wine is stored, the security, the temperature control system in the cellar, among other factors.
1WD: Do you ever worry that your clients are rich and powerful enough that if you advised them incorrectly about their collections, they could afford to have you ‘taken out’ by a group of Ninja assassins?
KZ: Actually, the ninjas worry me less than the fact that most collectors actually don’t insure their wines. So the advice that is most often ignored is the recommendation to insure a wine collection. As for the hazards of my occupation, I have excellent kidnap and ransom coverage.
1WD: Do you see any trends in the brands or types of wines that are being purchased by your clients? Do they seem to purchase certain wines more than others? Or is it a mix and more dependent on the client’s preferences? In other words, do see more wine collecting for investment, more for future enjoyment, or both?
KZ: From our vantage point we see how the wine is being insured after purchase, so I’m less privy to our clients’ drinking habits. I can tell you that 93% of our collectors insure their wine with what we call a “blanket” policy. This provides over-arching protection over the entire collection — including wine stored at various locations, such as a home cellar, a wine storage facility and any other “non-home site.” Blanket coverage has a maximum limit per bottle, say $5,000. It’s a simple and effective way to provide coverage for a fluctuating inventory. The other coverage option is “scheduled,” where individual bottles are identified and distinctly valued on the policy. Many collectors investing in long term holds on Bordeaux and Burgundy wines in particular will schedule their wines, because they do not intend to drink them for years.
1WD: We hear a lot about collectors in Asia driving up wine prices, especially for en premiere first-growth Bordeaux. Are you seeing the same trends? Do you expect more or less price elevation in the future from the Asian demand?
KZ: The biggest impact appears to be on certain vintages and labels that are highly coveted in the Chinese market. There is also the impact of American collectors having to bid in Hong Kong for wines they want — that brings increased transit exposure as those wine need to be shipped from HK back to the States.
1WD: What would it cost for me to insure my prized collection of RUSH concert t-shirts with you?
KZ: I might consider your t-shirts as long as we get your wine collection as well. Be sure to submit proof of value for those t-shirts.
1WD: What up-and-coming trends do you see developing in the wine world and wine market today?
KZ: There are a few trends that have an impact on our collectors:
- The internationalization of the wine market supports the long term investment potential, as more people get into the hobby of wine connoisseurship on a global level. Keeping updated inventory lists is a key factor in ascertaining value — especially for bottles that have gone up in value dramatically at auction in the past year.
- From a risk perspective, more wine is on the move, which means more exposure to damage. At Chartis, one of the services we offer clients is a transit protocol — offering to advice on the best ways to send and minimize that transit risk.
- Third, we pay very careful attention to the weather. Most wine is stored in a cellar or basement. The heavy storms that recently hit the East Coast, for example, can lead to flooding in the home and damage the wine. There are precautions collectors can take to minimize the risk of damage (example: keep bottles at least 8” off the ground), but this is always a concern. Similarly, power outages that result from intense storms can be especially harmful to collectors in the summer or for those who reside in humid climates.
1WD: Most of our readers are not wealthy – in fact, they are nearly the opposite of wealthy (I can tell this because I know that many of them are blogging and therefore cannot really be making a lot of money…). If they were seeking to purchase and store a wine for investment, what advice would you give to them?
KZ: Many people assume they have coverage for their wine under their renter’s or homeowner’s contents coverage. Yet most insurance policies have exclusions for “fragile items, perishable goods, and food items.” Wine can fall under all three of those categories. So as your readers are perusing their next auction catalog, I recommend they consider getting protection for their beloved assets. A good wine insurance policy should cover major catastrophic events (flood, hurricane, windstorms, fire, and earthquake) as well as theft, breakage and loss from malfunctioning cooling equipment. Your readers should speak with an independent insurance advisor to get quotes and information on all the coverage options available to them.
(images: courtesy of flatironcomm.com)