Art insurance in Florida is in limbo right now. Many art institutions in Florida this year had to consider the risk of climate change to their buildings and collections after Hurricane Ian made landfall in September. No significant art damage claims have been filed in the state after the Category 4 Hurricane, which killed at least 114 Floridians. However, art insurance experts told ARTnews that clients should anticipate increases to the price of premiums and changes to the breadth of coverage early next year due to the growing cost of climate change-related insurance claims.
“The tally is still going up but it’s going to be at least $50 billion,” said Joseph Dunn, president of fine art insurance broker Huntington T. Block, in regards to Hurricane Ian’s estimated damages. Commercial insurer AIG said it could rise to $60 billion.
Even if the art market escapes these types of catastrophic losses, the interconnected nature of the insurance industry is why policy premiums are expected to rise and the breadth of coverage will still change, according to data detailing the rising severity in billion-dollar-plus weather and climate disasters in the US and around the world.
“The pricing really hasn’t caught up to the exposure,” said Amee Yunn, Vice President and Fine Arts Underwriting Manager at Berkeley Asset Protection.
At the same time that coastal areas like Palm Beach and Miami are becoming concerns to insurance companies due to their shifting climate risks, more wealthy collectors keep moving themselves and their art collections to these locations.
“Anywhere there is a possibility of natural catastrophe, they seem to flock towards them,” said Yunn.
An interconnected industry
Art collectors, galleries and art museums buy art insurance to help manage the risks of theft, robbery, or damage. It’s a costly, but inevitable part of staging exhibitions, undertaking conservation work, or traveling to international art fairs.
According to Yunn, pricing for art insurance premiums has been pretty low compared to the level of exposure to various risks, making them very profitable. Most artworks don’t move after installation; damage commonly happens in transit or in an accident during handling. But Yunn said this profitability could easily change due to one bad storm in an area with high capacity (many art insurance clients) and their total combined risks (art that is heavily damaged or beyond recovery).
Art insurance companies also have to buy insurance themselves from reinsurers who insure more than just art, and those contracts often come up for renewal on January 1. The supply and demand of reinsurance is being squeezed due to the increasing payouts and losses from existing contracts and policies filing claims for extreme weather and climate disasters.
“It likely will have a knock on effects in renewals in the coming years,” Dunn told ARTnews. “Not just for art insurance, but for all insurance. That is just a reality of the market.”
The changing nature of storms in Florida
Florida is one of the top four states where the majority of Huntington T. Block’s clients reside or have a dwelling that contains art. In the past, Dunn said storms have knocked down walls and caused millions of dollars in damages to art collections.
While high-speed winds can cause extreme damage to facilities and dwellings where art is stored, rising water levels are a much bigger threat that can cause a mold or mildew infestation in paintings.
“We’ve had we’ve had to deal with that increasingly over the last 10 years,” Dunn said.
One interesting distinction between art insurance policies compared to residential or commercial real estate insurance policies is the latter two usually do not include flooding as a covered peril or source of damages, according to Dunn.
While Hurricane Ian made headlines this year as the deadliest hurricane in Florida since 1935, Dunn said the advance warning time for storms allowed for art to be moved to higher ground or flood-proof facilities if necessary. By comparison, the rapid nature of forest fires and earthquakes on the American west coast often makes it more difficult, or even unfeasible, to take precautionary measures or evacuate art.
Preventative measures are key
Collectors who have a lot of art tend to be high net-worth individuals living in homes designed to help protect them against high-speed winds and flooding, but Dunn still recommended a contingency plan to move artworks to a safe area of the home or a specialized storage facility. It’s also worth having a comprehensive inventory of the art items — including photos, invoices, appraisal notices, names of the artists, dimensions, and year of creation — kept offsite.
A growing risk for the future
As climate change worsens, its impact on the price and availability art insurance will increase. Data already shows damage from weather disasters — in particular forest fires, drought, and flooding — is getting more expensive and frequent. In the US alone, there is an average annual number of 7.7 weather and climate disaster events that occurred between 1980 and 2021. However, the annual average for the most recent 5 years (2017–2021) is 17.8 events. Rising insurance costs for builder’s risk and liability are already preventing some developers from going forward with commercial projects in the state. This could affect the cost and feasibility of future museum expansions and galleries beyond the ones planned 2023.
“There could potentially be a reckoning in the future if a bad storm were to come through,” Yunn said.