Protecting your valuable memorabilia collections

Joannesburg - Famous memorabilia auctions have attracted many news headlines of late: Recently Michael Jordan's championship sneakers from the "Dynasty Collection" sold for a whopping $8 million, setting a new global auction record for game-worn sneakers, according to auction house Sotheby's, who said that the set represents the most valuable and significant collection of Air Jordan sneakers ever brought to market.

In local news, the South African Heritage Resources Agency (SAHRA) has successfully stopped the auction of dozens of Nelson Mandela's personal belongings on the grounds of preserving the country's cultural heritage artifacts. A champagne cooler that was a present from former US president Bill Clinton was on the list, with bidding for it starting at $24,000.

"When investing in sports paraphernalia or collectibles, it is just as important to remember to protect them with insurance as it is your home contents or vehicles. However, as collections grow, so does the complexity required to insure them," says Tarina Vlok, MD at Elite Risk Acceptances, a high-net-worth insurer and subsidiary of Old Mutual Insure.

She says that sports memorabilia acquired at auctions in South Africa – whether it be that Francois Pienaar signed 1995 Springbok rugby jersey or Bafana Bafana championship soccer balls – can fetch extravagant prices given that beneficiaries are often charities, but that doesn't mean that you can insure it at the same value.

"There is a difference between the market and replacement value. The replacement value is the cost to replace or repair an item with a new one of similar kind and quality. Unlike replacement value, market value may be lower than the original purchase price, as it considers factors such as age, condition, and changes in market demand. Conversely, the market value could also be inflated compared to the replacement value given sentiments associated with it – like the Air Jordan sneakers," says Vlok.

She explains that it is important that collectible items or whole collections are insured on an agreed value basis, where collectors and insurers mutually agree the replacement value before a loss occurs.

"This agreed value is then what will form the basis of the compensation in the event of a loss. The insurer will try to source the exact item for you, but in the case of an item being irreplaceable, your insurer would compensate you financially for the loss based on the agreed value."

Vlok says that interest in sports collections may also rise when teams or individuals are victorious at major events like world championships or historic events. For the first time in 24 years, Bafana Bafana secured a historic place in the 2023 Africa Cup of Nations (AFCON) semi-finals, receiving prize money of R46.9 million.

"If you are starting a collection on this basis, whether it is due to love for the game or for investment reasons, it is important to know that not all collectibles increase in value, which is why you should consider working with professionals and specialists who can help you acquire the knowledge you need," says Vlok. "For example, collectible insurance has nuances not covered by ordinary insurance policies and is something that specialist insurers would offer." 

She says Elite Risk has clients with all sorts of collectibles, ranging from art and sports to antiques and rare goods, including stamp collection worth millions, which is "almost impossible to replace."

"While the sentimental value or uniqueness of these types of sought-after collector's item cannot be replaced in the event of a loss, insurance can put the collector back in the same financial position prior to when the loss occurred," she concludes.