Collecting with Confidence: Safeguarding Valuable Assets for Canadian High-Net-Worth Individuals

For Canadian high-net-worth individuals (HNWIs), collecting fine art, jewelry, vintage cars, and other high-value items is more than a passion - it’s a way to preserve wealth, create a legacy, and invest in beauty and craftsmanship. However, owning a valuable collection comes with unique risks, from theft and damage to market volatility. Protecting these assets requires a strategic approach that combines careful planning, expert advice, and specialized insurance.

The Value-and Risks-of Collecting

According to the 2024 Chubb Wealth Report, 46% of collectors plan to expand their collections this year, while only 5% plan to divest. Despite their enthusiasm, many collectors forgo expert advice, relying instead on personal research. While this approach may work in some cases, it increases the risk of overpaying, acquiring counterfeit items, or failing to properly safeguard investments.

The risks associated with collecting are significant:

• Theft: Organized crime groups are increasingly targeting affluent neighbourhoods, stealing high-value items like jewelry and watches. 81% of collectors surveyed cite theft as their top concern.
• Travel Damage: Many collectors move items between locations or lend them to galleries, making them vulnerable to damage during transit. 67% of collectors worry about damage while traveling.
• Market Shifts: Post-pandemic volatility in the art market has left some collectors disappointed by sales outcomes, while others face confusion about pricing in primary and secondary markets.

Art Collections: Protecting Masterpieces

Fine art is one of the most popular and valuable types of collections among Canadian HNWIs. Paintings, sculptures, and other works often appreciate in value over time, but they are also highly vulnerable to risks such as theft, environmental damage, and fraud.

Real-World Risks:

• Climate Risks: In areas prone to wildfires or floods, artwork may be at risk of irreversible damage. Improper storage or sudden environmental changes (such as humidity spikes) can also degrade materials.
• Counterfeit Works: Without expert authentication, collectors may unknowingly purchase forged or stolen artwork, risking financial loss and legal complications.

Summit Private Client Insights:

• Valuable Articles Policies: These provide specialized coverage for fine art, including protection against accidental damage, theft, and loss during transit.
• Climate-Resilient Storage: Insurers often work with collectors to identify facilities equipped to store art safely, particularly in disaster-prone areas.
• Fraud Protection: Policies may cover the cost of investigating provenance and recovering losses from counterfeit purchases.

Example in Action:A Canadian collector lent a painting by Group of Seven artist Lawren Harris to a gallery exhibition. During transit, the artwork sustained minor damage due to improper handling. With transit insurance and access to specialized restorers, the piece was restored to its original condition at no cost to the collector.

Wine Collections: A Fragile Investment

For those who collect rare wines, risks extend beyond the cellar. Temperature fluctuations, theft, and even market shifts can impact the value and integrity of a collection. With Canadian wine regions like Niagara and Okanagan gaining international attention, the appetite for wine collecting is growing—but so are the risks.

Real-World Risks:

• Environmental Damage: Wine is highly sensitive to temperature and humidity. A power outage or equipment failure in a climate-controlled cellar can result in spoilage.
• Theft: With increasing demand for rare vintages, wine collections are increasingly targeted by thieves.
• Shipping Hazards: Transporting wine, particularly internationally, poses risks of breakage or loss.

Summit Private Client Insights:

• Specialized Wine Coverage: Policies tailored for wine collections can cover spoilage due to equipment failure, natural disasters, or accidental breakage.
• Global Transit Coverage: Ensure that your wine is protected during shipping, whether for purchase, sale, or lending to wine shows.
• Access to Expertise: Some insurers connect collectors with wine experts who can advise on proper storage, valuation, and authentication.

Example in Action:A collector in Toronto lost part of their Bordeaux collection when a temperature regulator in their wine cellar malfunctioned during a heatwave. Their specialized wine insurance policy not only reimbursed the value of the loss but also covered the cost of replacing the system with a more advanced, fail-safe model.

The Importance of Expert Guidance

While 78% of collectors rely on their own research, forgoing expert advice can lead to costly mistakes. Professional advisors, such as art consultants and wine experts, provide insights into market trends, provenance, and valuation, helping collectors make informed decisions.

An often-overlooked risk is self-insuring collections. Nearly one-third of collectors opt to self-insure new acquisitions, leaving them financially exposed in the event of theft, fire, or other losses. Compared to the potential cost of a loss, insurance premiums for collections are relatively affordable.

Summit Private Client Insights: Work with experienced insurers who offer:

• Consultative Services: Some insurance carriers provide access to advisors who can help with collection management, including security recommendations, documentation, and storage solutions.
• Specialized Coverage for Unique Risks: For example, Canadian HNWIs in flood- or wildfire-prone areas can protect art and wine with disaster-specific provisions, such as moving items to secure storage before an event.

Protecting Collections at Home

A well-thought-out security strategy is essential for collectors, particularly those who display valuable items in their homes. Organized crime groups often target properties based on information shared publicly, such as social media posts about travel plans. High-value safes and layered security systems are effective deterrents.

Best Practices for Securing Collections:

• Install a High-Security Safe: Use safes with a TRTL-30 rating, weighing at least 750 pounds, to protect smaller valuables like jewelry and watches.
• Upgrade Home Security Systems: Implement perimeter alarms, interior motion detectors, and cameras. For added protection, consider asset-specific alarms for items like paintings or sculptures.
• Disaster Preparedness: In regions prone to wildfires, floods, or extreme weather, develop an evacuation plan for your collection. Some insurers can provide access to climate-resilient storage facilities.

The Legacy of a Collection

Beyond financial value, collections often hold deep personal and cultural significance. However, transferring these assets to future generations presents its own challenges. The Chubb report reveals that only 64% of collectors have taken legal steps to bequeath their collections. Without proper planning, items may be sold or mismanaged by heirs who lack the knowledge or resources to care for them.

Steps to Preserve Your Collection’s Legacy:

1. Develop a Comprehensive Estate Plan: Clearly outline how your collection will be distributed, including detailed instructions for heirs or institutions.
2. Document Provenance and Value: Maintain accurate records of an item’s history, authenticity, and appraised value to ensure smooth transfers and protect against disputes.
3. Educate Future Generations: Involve heirs in the management of the collection to foster appreciation and understanding of its significance.

Summit Private Client Insights: Include provisions for legacy planning within your insurance strategy:

• Bequeathal Planning: Some insurers offer guidance on transferring collections, including recommendations for charitable donations or gifting strategies.
• Coverage Continuity: Ensure that heirs are aware of insurance requirements to avoid gaps in coverage during ownership transitions.

Collect with Confidence

For Canadian HNWIs, collecting is both an art and a responsibility. Whether you’re acquiring new pieces, protecting existing ones, or planning for the future, safeguarding your collection requires a proactive approach. Specialized insurance products and expert advice are essential tools to manage risks and ensure that your passion for collecting is preserved for generations to come.

By working with experienced advisors and insurers, Canadian collectors can confidently grow and protect their collections, turning their passions into enduring legacies. Reach out to the Summit Private Client team today.

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