It may be a bit old fashioned of me, but I wonder if the local/nearest Police station still have a lost and found register?
If I'd lost an identifiable (s/no) expensive item I would try and report it, not least to obtain a reference number to report to support my insurance claim. In the old days, someone would report its loss, someone would, hopefully, report finding it and it could be returned to the lawful owner. The added bonus is that as the watch always belongs to the looser, you would establish that you took all reasonable steps to return it to the owner rather than just keeping it. Obviously that's not applicable here as the OP has to his credit tried his best to reunite the watch with it's owner.
Of course, you may not get past the first, probably phone call, with the local station, but it may be worth a try.