In the frame: fine art insurance

Between art dealers, auction houses, institutions and private collectors, artworks are often on the move – loaned from a private collection to a museum, purchased and sold at auction and displayed on global tours and at art fairs. Insurance and shipping are often among commercial galleries’ and museums’ biggest financial outlays.

Hiscox and Ascot Underwriting have recently revealed a new fine art consortium with a capacity of $1billion [£819million approx.]. Constructed to streamline the process of placing large fine art risks with Lloyd’s of London, the specialist insurer’s big-money scheme is appropriate for large private and corporate collections as well as museums and exhibitions. The move was prompted by the rise in the number of billion and multi-billion dollar collections which insurers have been seeing.

It goes without saying that insurance is an essential for such high value items as artworks and art collections, not only against theft but also damage – particularly accidental damage in transit.

In 2004, a landmark fire at art shippers and handlers Momart’s warehouse in East London rocked the sector, destroying around £50million of art. The disaster had an immediate impact on art insurance rates and acted as a warning to insurers and collectors alike.

Art insurers monitor and assess risk exposure particularly closely; an understandable attention to detail considering the sums of money involved. They can be especially wary of sites with an abundance of risk in one place, such as warehouses, ports and museums. Art fair premiums can be particularly high due to the conglomeration of many pieces under one roof, whilst galleries often find holding millions of pounds’ worth of art on loan costs a small fortune in insurance.

In an effort to offset these high costs to institutions, the UK’s Government Indemnity Scheme offers some financial relief by underwriting the risk on loans from private collections and non-national UK museums. Similar non-commercial initiatives also exist in other countries.

How much does it cost on average to insure an artwork on-the-go? Robert Read, head of art and private clients at Hiscox Private collections’ insurance, estimates that a non-fragile work of art would be insured at 0.01% – 0.15% of its overall value whilst travelling overseas, rising to 0.03% – 0.45% for a fragile work. The responsibility of insuring an artwork can either pass from its owner onto the borrowing museum, auctioneer or gallery whilst it is in the public realm, or it can remain with the owner but the premium can be assigned to the borrower in a short-term ‘nail to nail’ arrangement.

Whether lending to museums or simply on display in your own home, any private art collection is at risk of crime no matter its size. Bloomberg reports that 95% of art theft is from private residences, and that below 10% of stolen art is recovered.

It is not always discovered immediately that art has gone missing, especially if it was stolen from a storage facility or basement. Interpol recommends owners’ compile inventories of collections with photographs and exact descriptions, as well as taking care to protect premises with security measures. This will also strengthen any claim made to your insurers.

Make sure to protect your investments with a specialist insurance policy to suit your collection.