• Features

    Insurance

    Most collectors think of their homes as sanctuaries for art, but danger lurks. Along with the obvious culprits, like fire and water, light is also a big threat, and the damage it can cause is irreversible. Even certain framing methods can destroy a work over time. What are the best ways to make sure your art is safe, secure, and displayed to its utmost advantage? We asked experts in the fields of insurance, lighting, and framing for helpful hints.

    Earlier this year, thieves robbed the home of an art collector in Italy. The police asked for photographs of the stolen items but had to settle for dinner–party pictures in which several of the works appear incidentally in the background, often cropped and out of focus.

    For the fine–art insurer, it’s hard to refrain from saying to the claimants, “I told you so.” “Photos from a dinner party are not a good way to document your art,” says Dorit Straus, worldwide specialty fine–arts manager at the Chubb Group of Insurance Companies. This is largely because the better policies cover a work’s current market value, which is determined by its documentation and condition. “People should continually evaluate their collections and have them reappraised,” advises Jeffrey Haber, an insurance broker and senior vice president at Acordia Northeast. And they should do so particularly when art values are high, as they are now.

    After collectors have carefully documented their holdings, they should store the information safely off–site, and not attached to, or even near, the works themselves. “To insure an item properly, documentation is the only way to go,” says Jennifer Lee, director of art–collection management at American International Group (AIG). Many brokers, such as Henderson Phillips, New Northern, and DeWitt Stern, offer special services to help collectors accomplish this task.

    Steven Pincus, president of Acadia Risk Management, recommends that serious collectors take a look at inventory–management software like The Art Manager (or The Art Manager Express, for collections with fewer than 100 objects), which can be downloaded from the Internet, and Art Systems, a software package. Both applications allow users to store an image of a work, as well as such information as price, appraisal value, purchase date, location, description, condition, and provenance. Lee notes that a collector with many objects and multiple residences who doesn’t keep track of where everything is might not notice for months that something is missing.

    According to Straus, Chubb began providing collection– and risk–management software to all its museum clients in 1993 and is now planning to supply its private collectors with digital images of their works. In the event of theft, these images can be sent to the Art Loss Register, which maintains a database of missing and stolen pieces. While acknowledging the value of such computer–based services in protecting private collections, Straus is wary of online art valuation. “It’s important to know what your art is worth, but a real appraiser has expertise and can actually look at the work,” she says. Michelle Kenney, director of underwriting for personal insurance at Fireman’s Fund, agrees, but thinks the online service still has its advantages. “If I had something worth a lot of money, I wouldn’t depend on digital photos to appraise it,” she says. “But for items worth less than $5,000, it’s worth doing online. It’s a cheap, quick way to get appraisals done.”

    In a rising art market, Kenney suggests that collectors consider purchasing a scheduled variable possession policy. “It will pay up to 150 percent of an item’s value without a new appraisal if the market has changed,” she explains. “But it will never pay less than 100 percent of the stated value, even if the market goes down.” Kenney reports that she has seen an increase in requests for blanket schedules, which cover entire collections for a fixed amount, with a cap on what can be paid on any individual item. New pieces don’t have to be added to the policy, since the collection is insured as a whole. “It’s easier up front,” she says, “but more complicated if there’s a loss.”

    While it has been a good year for the art market, it hasn’t been one for art insurance. Robert Salmon, president of Fine Arts Risk Management, finds a dichotomy in the current market conditions, with half the underwriters offering low rates to attract business and the other half trying to increase rates. “Domestically, the rates are hardening,” he explains, because insurance–company stockholders are looking for higher earnings on their investments. “Premiums have been so low,” he says, “that no one’s been making any money.” In London, however, Salmon notes, there’s pressure for more volume. “The Lloyd’s syndicate is somewhat up,” he says, “but some underwriters are still willing to write for less.”

    Pincus, of Acadia Risk Management, explains that rate increases aren’t the only way for an underwriter to reduce risk and maintain profitability. “There can be higher deductibles or a restructuring in limits for transit and ‘other location’ coverage”—when the work is with a framer or restorer, he says. But Paul D. Fritsch, fine–arts underwriting specialist at insurer ACE USA, believes that the U.S. firms follow the Lloyd’s syndicate to a certain degree, and the London markets have been providing broad coverage with few exclusions. “If we American carriers want to compete,” he says, “we must do the same.”

    A reduction in the number of players has also affected the market. Hard times at Reliance, formerly a major market force, and at Redlands Insurance Company have changed capacity, that is, the amount of available insurance. Still, there are plenty of insurers left to go around. “AXA, Chubb, and the others are seeing more business, but I don’t see the soft market over yet,” says Diederich von Frank, president and chief executive officer of AXA Nordstern. “There’s still an abundance of capacity. Museums and exhibitions are getting fabulous rates. You can’t play hardball—the market is still too soft.”

    Haber agrees that it’s “a little tighter,” but believes it’s still competitive. He points out, “Insurers are still anxious to write this business because it remains profitable, even though rates were spiraling downward for years.” Private collectors, too, he adds, have been able to continue to get competitive rates.

    One factor that has not played a role in the market’s recent tightening is losses. “No one’s gotten out of the business because of bad experience and devastating claims,” says Haber. It’s a sentiment echoed throughout the industry.

    In fact, profitability is the reason why Atlantic Mutual has been focusing on building its art, antiques, and valuables business. “It’s been very lucrative for us,” says Grace Thomas, leader of Atlantic’s art–insurance initiative. “My goal is to write as much as I can.” To help her, the company increased capacity from $10 million to $100 million last July. In response, its museum portfolio has doubled.

    What’s a collector to do in this market? Salmon, of Fine Arts Risk Management, recommends that collectors purchase long–term policies to lock in current rates. Jane Stapleton, managing director at AON Huntington T. Block Insurance Agency, agrees. “Art insurance traditionally tends to trail the property and casualty market,” she says, and since the property and casualty market has already tightened, “rates are going to go up.” She advises collectors to negotiate the best deal they can with the company they are already using. “If you’ve had a re
    lationship for ten years, do you turn around in year eleven and look for the cheapest price?” she asks. Beware, says Stapleton. You may be in for a rude surprise if you need to file a claim or have a work repaired, and the new firm doesn’t offer the same high level of service that you’ve experienced in the past.

    That’s why it is also important to scrutinize carriers for their financial strength, their expertise and speed in dealing with fine art, and their claims–handling and payment record. “A claim can get dragged on and on if the company doesn’t settle quickly,” says Straus. “Ask your broker to provide financial statements on the company.” Salmon agrees. “Look at claims history,” he advises. “Phone around for references.” Adds Stapleton, “Make sure your broker has errors–and–omissions coverage. If a mistake is made, you don’t want it to affect you.”

    This is certainly a good moment to reassess your coverage, since “it’s possible,” as Anna Kisluk, director of the Art Loss Register, points out, “that thefts will rise again because the art market is booming again. In the late 1980s the art market was hot and burgeoning. That’s when there was a rash of museum thefts.” She recalls a couple of thieves who switched from stealing videos to stealing art because they noticed that van Gogh’s Iriseshad sold for over $50 million.

    Harold Smith of Cunningham Lindsay Worldwide Adjusters makes several recommendations for collectors who want to protect their work. Smith, a fine–art adjuster for 54 years, suggests attaching small radio alarms directly to valuable pieces of art, since he has found that people with important collections often keep their house alarm systems off for extended periods of time. “In the event that the picture is moved,” Smith explains, “the alarm goes off.” Smith also advises collectors to switch to alarm systems that use both phone lines and radio signals simultaneously. “This way, if someone compromises the phone systems, the signal still goes out,” he says. And last, if collectors get a series of hang–ups—six or more in a short period of time—Smith advises that they call the police, because their house is probably being cased. “The crooks are trying to see when you’re home and when you’re out,” he says. “They’re looking for a pattern.”

    But while there’s plenty of Thomas Crown Affairintrigue in the art world, transit and the environment remain the two biggest risks to works of art. Experts advise collectors not to skimp when packing and shipping a work—and to consider carefully where they display it. “If you hang a painting in direct sunlight and it fades, 99.9 percent of policies won’t cover it,” says Pincus. Lee at AIG estimates that over 60 percent of claims are related to losses incurred in transit, including moving art around the collectors’ own homes. “We’re talking about bad packing and handling,” she says. “These are avoidable problems.” And packing and shipping have become more affordable.

    Many collectors think of their homes as art sanctuaries, but they should be aware that danger lurks. “Shut the shades on your windows. Never put labels on the backs of paintings. Keep the temperature at 68 to 72 degrees, and the humidity at 50 percent,” advises Alison Dalglish, fine–art specialty–practice leader at Marsh & McLennan. Expect and insist that the same standards be maintained wherever you are shipping your art. “You don’t want your painting to depreciate due to your lack of care,” Dalglish warns.

    Certainly, says Stapleton, no one in the art world wants to lose a piece of art. “We’re not dealing with widgets here,” she says. “Art evokes tremendous emotion in the people who own it, sell it, and protect it. These are important, valuable parts of our history, and the vast majority of people we deal with treat them as such.”

    Finally, collectors shouldn’t wait for something to happen before they begin updating and organizing their records. Otherwise, they may find themselves thumbing through dinner–party photos with their fingers crossed.

    Michelle Falkenstein last wrote for ARTnews on art dealer Marian Goodman.

    Copyright 2014, ARTnews LLC, 40 W 25th Street, 6th Floor, New York, N.Y. 10010. All rights reserved.