[MSN] Fine art owners have an oddly casual attitude towards risk.

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Fine art owners have an oddly casual attitude towards risk
Friday 3 August 2007

WITH price records being smashed every week at art sales, and rich investors
adding a speculatory touch, the art insurance market ought to be booming,
writes James Brewer.

In fact, the picture remains monochrome and coverage sketchy. 

Global fine art insurance premiums amount to a mere $450m or so, a fraction
of the income the industry earns from big-ticket property placements, and
the market is dominated by very few carriers, notably including Hiscox and
AXA Art. 

Hiscox has put a firm stamp on the sector, creating market policy wordings,
and running its own exhibition space, Hiscox Art Projects, on the ground
floor of its London office in a dining space that is open to the public. 

Robert Read says there is much art that is uninsured, or under-insured. From
the perspective of the collecting public, this is to some degree
understandable, while insurers are unwilling to relax their premiums for the
sake of adding to their portfolio. 

"It is hard for your collection to be properly valued," admits Mr Read, "and
most of the major museums in Europe and the Far East do not insure their own
collections." 

He says: "The increase in values of works has not been matched by a
corresponding increase in the overall premium volume, and that makes our
business a lot more volatile. 

"Whereas 10 or 15 years ago, $10m to $15m would be a significant loss,
today, that is what a minor Impressionist work is worth. 

"Lots of people underestimate the increased volatility of the insurance
market. We are insuring some single items that can take out one-third of the
premium in one go - just a single painting meeting an unfortunate end." 

Insurers rely on brokers to bring them the business, but this class of
business is relatively unremunerative to market. Some collectors just cannot
be bothered, on the basis that "if it goes, it goes". 

Read says, "We are not competing against other insurers as much as against
people saying 'I shall take the risk myself'." 

While certain art or investment enthusiasts view insuring such treasures as
less than essential, Read argues they are missing the point. "We all want to
protect our wealth in the way we choose our pension, our bank or how we
invest money. All those people for whom an art collection is a significant
part of their wealth will want to protect that. If they lost a $100m art
collection, that is a serious dent in their pocketbook. Dealers take
coverage, but the people who are uninsured are the private collectors." 

Of the target audience, many people in the US - where there is more of a
culture of insurance and protection - in the UK and Germany are already
convinced; but there remain plenty of opportunities in southern Europe,
including Spain and Italy, even in France, and in some of the Scandinavian
countries, in India and Russia. 

Hiscox advises policyholders to have their possessions valued every three to
five years to ascertain the correct values and the right level of insurance
cover, and has even introduced an index similar to the housing price index
used by insurers to track the increases in the cost of homes. 

Fine art, like much of the rest of the insurance market, has a two-tier
premium rating. 

A collection housed in a major catastrophe-exposed area has in recent times
tended to be charged rate increases, albeit from a very low base. In other
areas, the insurance buyer has often managed to edge rates downwards. 

While art thefts hit the headlines, insurers tend to deal with a huge amount
of more ordinary, everyday upsets. Says Read, "There is not much you can do
with a stolen work, and if you get caught, you are probably going to jail." 

Art is rarely stolen to order, and is impossible to sell on the open market.


Half of fine art market claims are concerned with items damaged while they
are being moved. 

Insurers will pay the cost of repair and depreciation, and they are
welcoming new ranges of specialist packing cases that are tailor-made to
cushion the stresses of transport.

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