HNW - film & celebrity memorabilia: No business like showbusiness

Memorabilia is hot stuff, if attendance at the Winter Memorabilia Show at the NEC Birmingham last November is anything to go by. Its offering of TV, film, comics, sports and music collectibles attracted even more visitors than the earlier one in March.

Memorabilia essentially means objects treasured for their memories, which can arise from connection with a significant historical event, sport, culture or entertainment. Typical film memorabilia includes autographs, costumes, photographs, posters and props associated with a particular film or film star. "Memorabilia is definitely a growing industry, and collectors are just as avid as collectors of art and antiques," observes Simon Mobey, Chubb's Europe personal lines manager, who says the whole subject of collectibles and memorabilia can create an issue for insurers, because they might not be properly insured.

Owners are typically very fond of the items but may not know their financial value or realise their ordinary household contents policies would not fully cover them in the event of loss. Mr Mobey adds that if a collection is not specified — or properly itemised — any claim would be subject to a defined policy limit.

Fluctuating prices
According to Nick Brett, underwriting director at Axa Art, memorabilia collections don't require a vastly different approach to insurance than more traditional items. "We are underwriting the client, and going through the usual checklist, looking at issues such as how well they will protect the object, and whether the client is a good moral hazard." But one area of difference, explains Mr Brett, concerns valuation because, "if the celebrity commits a major faux pas, that can affect value. Fine art, on the other hand, has an intrinsic value unaffected by the conduct of the artist".

So, how unpredictable or volatile are valuations of memorabilia, and do customers bear this in mind when insuring items or collections? After all, when it comes to prices attracted at auction, these appear to fluctuate wildly and often prove unpredictable.

For example, a pistol held by Sean Connery as James Bond in a poster to promote the 1963 film From Russia With Love made a killing at Christie's in November, selling for £277 250 — 14 times its estimate. The last time it appeared at auction, in 2001, this pistol sold for only £14 100. By stark contrast, a rare Darth Vader costume made for Star Wars film The Empire Strikes Back — and which was expected to fetch around a quarter of a million pounds at the same Christie's auction — failed to sell.

The following month, a Mercedes-Benz, once owned by Elvis Presley, also failed to rock the clock when it was sold by Bonhams for £80 700. "We were hoping for more," admits spokesman Julian Roup. The restored vehicle, one of only a handful of cars Elvis registered in his name, had a pre-sale estimate of £150 000 to £200 000. Leonie Ashfield, spokeswoman for Christie's, believes the differences in Darth Vader and Bond auction results could be explained by the fact James Bond is an established market, with such a long-running and ongoing series of films spanning many ages of fans — whereas Darth Vader is more one-generational.

John Thornton, head of client insurance services at Christie's, says that to reduce the risk of price volatility and potential claims disputes it only recommends clients to insure memorabilia on an 'agreed value' basis. "The value is agreed upfront with the insurer, the premium is calculated on this figure and any claims paid at that level." This is echoed by Matt Schofield, head of Zurich Private Clients, who notes that if objects are insured on an agreed value basis it does not matter if the value of memorabilia falls because that value is what the policyholder will always receive in the event of a loss.

However, Mr Thornton adds that as these markets are still developing it is important clients check values periodically to ensure they are not over or under-insuring, and that they share this information with their insurer. Robert Korzinek, fine art underwriter at Hiscox, comments that, while the price paid at an auction is a good indicator of value, the caveat is to regularly ask the client to revisit value. This is especially true if the memorabilia is linked to a specific event. For instance, the release of 1997 blockbuster Titanic led to a surge in interest and, therefore, the value of items associated with the ill-fated vessel and its tragic sinking in 1912.

Pre-claim agreements
That said, Mr Korzinek notes underinsurance is the more usual problem, as memorabilia tends to appreciate in value. If, at the time of loss, the market value has increased beyond the sums insured, an 'extended replacement' policy will pay up to 125% of the sum insured — "provided that either a walk through validation exercise has taken place or a valuation can be submitted that is no more three years old," adds Garry Simmons, associate director and head of property & liability claims at Sterling Insurance.

Where the value is not specified in the policy, the indemnity principle applies, explains Mr Mobey, who adds: "Chubb stops value becoming an issue by sending an appraiser out before insuring." Zurich also obtains its own valuation, from Gurr John, at the beginning unless the policyholder has bought from a reputable source, like a leading auction house, says Mr Schofield.

"It is better to have a pre-claim agreement with high net worth clients, and to fully understand the risk pre-claim to reduce quibbles," says Bob Trott, managing director of Oak Underwriting, who adds that if an agreed value basis of cover is sought, "we would want the item valued by a recognised valuation specialist", and the onus is on the policyholder to prove the value.

So what factors commonly impact on value? Well, celebrities don't have to be dead for memorabilia relating to them to rise in value — as evidenced by the original lyrics to Bob Dylan's The Times They Are A-Changin' fetching almost half a million dollars at Sotheby's in December — but it can help, particularly if their death is recent.

Take Michael Jackson, who recently topped a list of the highest-earning deceased celebrities, making more than Elvis Presley and John Lennon. Posthumously, he earned £183m over the past 12 months.

The impact of a death like Michael Jackson's is often time-limited, typically lasting about a year, because the market gets flooded with items and then crashes, explains Ms Ashfield, adding: "We would expect it to stabilise after a year, but it is difficult to predict." Jason Cullen, owner of website www.rareandsigned.com agrees that the surge in interest and value of anything associated with the death of a known figure is only sustainable for the short term — and a delay of several months, following their death, is needed to begin to gauge the market.

"On Michael Jackson's death, we initially suspended the valuation of his material as it was impossible to lay a value of any great accuracy," he explains. "Even now values can vary greatly." Items from the megastar's stage wardrobe attracted furious bidding in December at an auction of celebrity memorabilia in Beverly Hills when Julien's Auctions sold a glove worn during the Bad tour in the late 1980s for $330 000 (£213 000), a signed jacket raised $96 000 and a fedora went for $72 000. But it would seem the value of celebrities' memorabilia does not always tail off in the years following their death, underscoring the unpredictable nature of such collectibles. For example, X-rays of Marilyn Monroe's chest were sold for $45 000 at a recent film memorabilia auction in Las Vegas — although experts had estimated they would fetch a mere $3000.

The value of rarity
Rarity is important to value, so the autograph of a very private individual will have more value than one done at a mass signing of books, t-shirts or albums. Mr Cullen says that values will typically fall "when an author will not hesitate to sign a book for a fan, compared to an elusive author who seldom makes appearances or rarely signs a book" in addition to the simple fact that certain memorabilia trends go out of fashion.

Signed sports shirts, footballs or cricket bats are also worth more linked to an historic event, such as a World Cup or the Ashes, than a named personality alone. But there are provenance risks, as the autograph market is prone to fakery. Mr Simmons remarks that values are very dependent on fashions at the time of loss and the value can quickly increase or decrease as a result of the celebrity's popularity. He adds: "Items usually have a high sentimental value so customers struggle to separate this from the realities of their true financial value, with over-inflated insurance values commonplace, and the number of fakes is high."

As to the influence auctions play or not with regards to accurate valuations, Mr Simmons comments: "It is difficult to place a professional valuation on items likely to be sold at auctions as it very much depends on how much a buyer wants to pay on the day in question — and whether there are a number of rival bidders." However, the sum paid at a reputable auction house may well be accepted as the 'agreed value', says Mr Mobey.

Prices paid in charity auctions, on the other hand, would be less reliable, he adds. This is because the price reflects what someone is willing to donate to a cause, and items may also have emotional connotations, thus not reflecting the intrinsic value. Mr Simmons says such auctions have increased in recent years, but "items purchased at charity auctions, fuelled by drink and bravado, are usually purchased above traditional auction values".

He adds that customers usually appreciate the price paid was an inflated one and a more sensible figure is, ultimately, agreed. Mr Korzinek takes a slightly different view: "The price paid at a charity auction might well reflect intrinsic value. Market value is not fixed, and can be subject to variation. We would advise the owner to seek expert advice."

So, what forms of memorabilia have sustained their value over a long period, or have become highly collectable in the last few years? It certainly seems the cultural revolution of the 1960s has had a lasting impact, and Stephanie Connell, head of the entertainment memorabilia department at Bonhams, reports that The Beatles have retained their popular appeal, while more obscure musical artists have not held their price as well. "Gold discs have not held up either," she comments, "unless they are original ones from the artist."

When it comes to movie celebrities, as indicated above, Marilyn Monroe memorabilia remains collectible. But Mr Cullen comments: "Even the best collections will rise and fall, but still be a sound investment, sustainable in the long term. Rock-n-roll and movie memorabilia can sit nicely into this section where renewed interest with a new album or franchise movie can generate interest overnight in items that may have been comparatively dormant for years."

He says that the Saw horror films as well as the James Bond/Ian Fleming franchise are two areas where collecting is currently buoyant, as is Harry Potter. "The first printing of the original JK Rowling book — Harry Potter & The Philosopher's Stone — had a recommended retail price of £10.99 in 1997. Today you would be hard pushed to find a perfect copy for less than £30 000."

As to insurance claims, Mr Korzinek reports that claims experience is good, with no catastrophic losses, and that this is a profitable area of business. Theft is not a major peril with memorabilia, although accidential damage, caused by moving the items around — such as taking them to conventions to show them off — can arise. The risk of water damage is mentioned by Mr Mobey, who agrees theft is not a significant concern — other than with football memorabilia — primarily because memorabilia is difficult to 'fence.'

Claims examples
• A collection of motor racing film memorabilia, including many items linked to Steve McQueen, valued in excess of £300 000, was damaged by heat and smoke. Restoration specialists are hoping to successfully restore it.

• Star Wars memorabilia bought on Ebay at low cost. The items were photographed, then allegedly stolen following what appeared to be inflated values. The claim was withdrawn when the policyholder was asked for proof of Ebay purchase transactions.

• Mid-net worth theft claim from collector of signed football shirts, claiming values based on prices paid at charity auctions. Significant price variations depending on whether the signed shirt was worn during a game and difficult to establish whether some were genuine or fake.