Advantages of a specialist fine art insurance policy

Custodians of fine art, such as universities, government bodies, corporations, museums, and individuals, must contend with a number of risks. Theft and damage are the most obvious ones, but natural catastrophe, fire, transit, defective title, and depreciation risks also need careful consideration.

Many art owners rely on government indemnity schemes introduced to encourage art exchange or property programmes to cover some of these risks. However, in numerous cases, a specialist art policy might better suit their needs providing higher limits (usually at lower prices with no retention), wider coverage, and access to expertise from loss adjusters who can help limit damage and costs.

Risks associated with owning fine art

Art heists are widely reported and often capture the popular imagination. The theft of 13 famous artworks by Rembrandt, Vermeer, and Degas valued at US$500 million from the Isabella Stewart Garner Museum in Boston remains one of the world’s biggest unsolved art thefts. At the height of the pandemic in 2020, paintings by Vincent van Gogh and Frans Hals were stolen from museums in the Netherlands and are yet to be recovered.

However, despite the headlines, museum risks are generally well-managed by the use of CCTV, gallery attendants, and security systems. Art collections held without these risk mitigation measures in place can be more vulnerable to theft and damage. Cleaners, for example, can accidentally damage works of art and there has been at least one instance of a painting damaged by an employee swatting a fly.

In any case, some of the biggest art losses in history have been due to fire. In 2018, a devastating fire at the Glasgow School of Art’s Mackintosh building in the UK destroyed 8,000 books and 90 oil paintings. A number of priceless private collections have since been either damaged or destroyed by fire.

Natural catastrophe events such as earthquake, wildfire, flood, hurricane, and windstorm also threaten collections around the world. Sculptures located outdoors are particularly susceptible to some of these risks.

Gaps in provenance of a painting can result in defective title risk — where there is the potential for a third party to make a claim on the work, asserting their ownership.

Defective title risks can arise if a work is stolen or looted, its ownership is disputed, or documentation of previous transfers is incomplete.

In such cases, an individual or entity purchasing the work may face legal and financial consequences if a legitimate claimant emerges later on. This can result in costly legal battles, potential loss of the work, or even reputational damage.

Specialist art policy versus property policy

With so many possible risks to consider, it is crucial to choose the appropriate insurance coverage and that process begins by understanding the differences between a specialist art and property policy. Specialist art policies generally provide:

1. Broader coverage

The art market is constantly fluctuating. Under a specialist art policy, the basis of valuation of a work of art will be the higher of the value declared on the schedule or the current market value at the time of the loss. Property contents policies usually only provide indemnity for the scheduled values.

A pairs and sets clause provides cover for the total loss of a pair or set, even in the event only part of the pair or set is damaged. Property insurers are usually unwilling to provide this cover.

For items where the value of the object is not monetary but historical or cultural, and, in some cases, the cost of restoration could exceed the market value of those items, a non-economic repair sub limit can be added to a policy. This enables works to be restored in excess of their value up to this limit. This would only be included within specialist fine art cover.

Defective title is a growing concern for institutions due to increased access to information through the internet, combined with donations frequently gifted to collections. A specialist policy can provide cover for both legal defence costs and any loss of property in the event that an item is required to be returned to its rightful owner.

2. Exhibition and transit coverage

The increase in the popularity of blockbuster exhibitions, as museums seek to boost dwindling attendance numbers, means institutions are under huge pressure to share collections — both at home and abroad. However, accidental damage to masterpieces can take place during transit and installation and de-installation of a work. For instance, bubble wrap can potentially cause damage by leaving imprints on paintings, especially if the wrong type is used. This can lead to a decrease in the value of the artwork.

Coverage for exhibitions is regularly incorporated into a fine art policy, while loss adjusters can advise on how to procure shipping and packing specialists to prevent damage to art in the first place. This would only be included within the specialist fine art cover.

3. Priority response

Fine art insurers are able to provide vital support when insureds face calamity. For example, a university library collection was damaged by flooding from a burst pipe. Insurers were able to arrange for freezing vans to arrive on campus, so the books and manuscripts could be rapidly frozen, and saved from further damage. There have been cases of insurers arranging for art to be moved to safety following a flood or fire warning.

4. No deductible and competitive rates

Specialist art insurance rates are usually a fraction of property rates. This has led universities increasingly to insure textbooks that are in general circulation under a specialist policy that provides better value than a property policy.

Notably, specialist art insurance policies usually have no deductibles or at least significantly reduced deductibles, in comparison to property insurance policies.

Buying the right cover

Some art is irreplaceable and no compensation can make up for its loss. Nonetheless, art custodians are recommended to ensure they have the most suitable insurance coverage in place, should disaster strike. It is important to know that a specialist art policy may more effectively address the unique risks associated with owning fine art or collectibles than a property policy or government insurance scheme.

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