Usually it will be based on purchase documentation…so if u bought from an AD at retail, the claims will be paid based on that receipt value as a start, where some insurers may have depreciation clauses. But if you bought from a grey dealer, just need to furnish the receipt from them. And when declaring the item in the policy upfront, ensure you state the itemized value. Insurers usually do not pay based on prevailing Market Value for such watches , but will be based on documentation. If no documents available, they may most likely pay based on Retail as a basis.
And if it has precious metals in it (ie gold, diamond)need to ensure that the value of the watch is within the allowed limits of your insurance policy - such as certain home contents policy(up to 1/3 of total sum insured of all contents in your home). But if under All Risks cover, usually the limits are better / no preset limit.
Hope i didnt confuse further. Also, different insurers may have different practice. Important to check clauses.
Ps: im in the industry…tho not selling it directly