For high-net-worth individuals, precious jewelry is primarily an emotional investment. Lately, fine gemstones are being cherished for another reason — their skyrocketing value.
Rare diamonds in vivid blues, pinks, greens and especially red colors have rung up record prices in recent auctions. The eye-opening sales include a record $57.5 million for a 14.6-carat blue diamond at Christie’s in May 2016, and $31.6 million for a pink 15.4-carat diamond at Sotheby’s the same month. Even great grandma’s precious diamond brooch, handed down through the generations, may be worth a lot more than it was just a few years ago.
While both raw and finished gemstones are more volatile investments than stocks, bonds and real estate, their rising value gives pause for consideration in another context — adequate insurance limits that keep pace with this appreciation.
I recently chatted about the rise in the value of high-end gemstones and jewelry with Stephanie Staley, regional director in the private client practice of insurance broker Arthur J. Gallagher & Co. One of the topics we discussed is the need for owners to obtain more current appraisals of their jewelry collections.
Staley offered an example of a Chubb-insured client that underlined this importance.
“One of our clients has a five-carat round, internally flawless diamond ring that was appraised and insured in August 2000 at a value of $300,000,” she said. “However, Chubb provides an annual inflation factor to help offset the rising cost of precious metals and gemstones; as a result, the value of her ring increased to $448,000 by 2014.”
Had the ring been lost or stolen that year, Staley’s client would have received a check for that amount. Fortunately, no claim had been filed.
“We had a meeting with the client at our Dallas office in 2014,” said Staley. “Chubb’s jewelry expert, who just happened to be visiting us, looked at the ring and estimated it had a value of about $800,000, much to the client’s delight. The ring was subsequently reappraised for just under $900,000, and is currently insured for about $935,000. It had gone up exponentially in value.”
With pieces that have larger gem stones, a good rule of thumb is to have the items reappraised every three years.
All That Glitters Isn’t Gold
No one is advising that readers invest hundreds of thousands of dollars in a colored diamond, since even top-quality gemstones are volatile investments at best. But the recent hike in jewelry prices does indicate that owners need to reassess the value of their collections, which may be worth a lot more than they think.
The four most important factors in determining the value of a diamond are its clarity, color, cut and carat weight (one carat is about 200 milligrams).
Another factor is provenance — who owned a gemstone in the past. For instance, jewelry from Elizabeth Taylor’s estate was auctioned at Christie’s in 2011 and sold for $115.9 million; many pieces sold well beyond their initial estimates. The bottom line: Two exact gems, only one of which has an interesting history, may have different values.
More than just diamonds are rising in worth. Record prices have also been fetched for both high-quality sapphires and rubies of rare colors, which have jumped approximately 20% and 52% in value, respectively, in the last two years. Again, the market is volatile and difficult to predict, so the prices may return to where they were two years ago. The important thing is to insure fine jewelry pieces at their current value.
Take Care When You’re Promenading
Theft and loss are the primary risks confronting owners of top-tier gems. Unlike fine art, most stones will survive a fire relatively intact. Damaged gems also can be recut to preserve much of their value.