Insurance 101: The Resurgence of “Neo-Exotic” Classic Auto Collections

People collect what they are enthusiastic about: art, jewelry, wine, coins, signed memorabilia, and of course, autos. My love of exotic autos dates back to early childhood; I will admit to having the classic poster “Justification for Higher Education” in grade school. I studied and read about those vehicles, the lineage, the history, and was hooked. -Those that know that reference, will follow this white-paper, easily.

While investment strategies come and go, and shifts change in the buying and selling of goods – there are also investors that collect in the space of nostalgia and limited supply in the auto world. Individuals or buying groups with the liquidity and patience to find, broker, or wait for the right timing to purchase a single vehicle -or fleet, invest in knowing the market, availability, values, and expenses associated with maintenance, storage, onboarding, and they evaluate return on investment.

From ‘barn finds’ of a classic Porsche, Mercedes, or Ferrari, to sought after ‘neo-classics’ – there is a resurgence in the collector auto space. Most neo-classics are garage kept, single owner, low mileage, pleasure use, investment vehicles, most sold in showroom, mint condition.

?Over the last 20 years, we have seen the classic auto insurance industry radically change underwriting guidelines. Demand has also shifted from the antique autos of the 1930s-1950s, and from the 'muscle cars' of the 1960s-1970s, to a "neo classic" from the 1980s-current. From the insurance industry’s standpoint, generally speaking, the risk of a high value, high performance or limited-edition vehicle is the potential for loss, and the expense for fixing or replacing that vehicle after a total loss.

Insurance carriers evaluate how to keep that auto collector building their collection over time, retaining a profitable line of business, and building brand-loyal policy holders that refer like-minded collectors to grow that niche business.

Some specialty insurance companies tightened restrictions on certain vehicle lines, others got away from adding exotic collections, all together. As loss ratios improved, and the loss of revenue was factored in from major collections and policies that moved their business, many companies started wading into the collector-auto market again… slowly, cautiously, and with firm underwriting requirements.

Specialty auto insurance carriers had several shifts in underwriting over the last 20 years:

1.??????????If you wanted to insure a vehicle valued $250K+ - you had to have underwriting approval.

2.??????????If you were a policy holder with a growing collection, underwriting guidelines were less restrictive as the collection grew, so long as driving activity and claims were to a minimum.

3.??????????With growing programs, the trend of more claims wrecked many carriers’ loss ratios – and so several specialty companies slowed or ceased adding on newer exotics and super-cars.

4.??????????Underwriting new clients was a challenge; the insurance carriers did not want anything newer than a 20-year-old vehicle; then it was nothing less than 10 years old. Then it was… “if it makes sense, we will consider it --- no ticket, accidents, or young drivers.”

5.??????????When a noticeable shift occurred pre-2020, there was a push for neo-classics, as the market noticed a trend for new, cash-liquid, collectors in their 20s and 30s sourcing a nostalgia for 90’s era exotics like the Acura NSX, Ferrari F355 & F50, Dodge Viper GTS, McLaren F1, etc.

6.??????????Auto premiums were considered high, and coverage offers were typically declined for policy holders under the age of thirty with no history of driving/owning an exotic vehicle.

Economics 101: when there is a higher demand than what supply is available, the price of goods will go up; and where buying capital is without limit, people will pay whatever it is to acquire the product. In this example, it is the price of the vehicle, and soft costs of ownership, and the insurance premium to protect that investment.

?Three examples of neo-classic auto value increases:

• ?2005 Porsche Carrera GT? ??Purchased for $425K-$600K / Currently insured for $2.1M
• ?2005 Bugatti Veyron? ??Purchased for $1.1M-$1.4M / Currently insured for $2.5M
• ?1992 Ferrari F40 RWD? ??Purchased for $400K-$900K / Currently insured for $2.3M
• 1985 Lamborghini Countach ???Purchased for $125K / Currently insured for $500K - $2M

?We represent clients and offer insurance coverage in all 50 States, and we also consult on international collections and shipping fleet coverage capabilities. For those that drive their vehicles on track, we have a specialty coverage for that excluded exposure, as well.

?We have multiple insurance programs with specialty insurance carriers such as Hagerty, Chubb, AIG, PURE, and Cincinnati Private Client. We expedite the purchase requirements, international shipping, or transport, and ensure that the right coverage is on every vehicle.

?We can help.

Jason M. Pond, CAPI, CPRIA - Shareholder?&?Personal Risk Management

972-715-8703 – Direct??/??972-387-3808 – Fax??/??972-342-8645 – 24 Hour Mobile

[email protected]? www.swinglecollins.com