Fine art insurance is cover for valuable artefacts, sculptures and paintings, including those by old masters such as Johann Zophanny, and by contemporary artists such as Chris Ofili.
It is bought by private collectors, museums and galleries, conservators, restorers and specialist art transporters. The insurance market is split generally 40/60 in terms of private and commercial clients.
The main insurable perils for fine art include theft, fire, accidental damage and natural catastrophe events including earthquakes, windstorm and flooding.
Most cover is for physical loss or damage only. Often if a piece is damaged, then the largest part of the loss is not the actual repair cost but the subsequent loss of value in the piece. Most losses occur due to accidental damage during transportation, when the artwork is on the move.
Collation of art, such as during exhibitions, typically comes under insurance known as 'nail to nail' cover. Certain exhibitions can need cover upwards of £1.6bn, depending on the artists involved. The need for security around big exhibitions can be an issue; getting the right balance between allowing access to the general public and keeping the pieces safe and secure.
The Art Loss Register is a database registering stolen artworks. This is accessible to insurers, the police, auction houses and potential buyers, to help prevent stolen works being sold on. All pieces must have a title document, showing provenance and who has owned it in the past. Insurance cover is available against defective title, where title is contested. This coverage offers indemnity for additional expenses should there be a dispute.
When assessing cover, looking at the artwork's location, surroundings and how that building operates can be just as important as its value. Insurers need to be certain that the right burglary and fire systems are in place and in areas such as California, factors such as earthquake shock and movement also need to be considered. Wind and hurricane mitigation can also be a factor, such as plans to move art pieces to safer storage if a hurricane is approaching or specialist secure rooms or areas within buildings. One of the largest recent major losses was as a result of flooding caused by superstorm Sandy in the Chelsea district of New York, where a number of art galleries are located. The accumulation of losses made it a major insured event for the market.
Fine art is a particularly international market. Traditionally, it was mainly written from London; however this has changed during the past 20 years. It is now more prevalent across Europe, in the US, Far East, Middle East and Latin American markets.
Most private collectors are passionate about their artwork and take great care of it. The safest place to keep fine art is 'hanging on a nail' or 'standing on a plinth'. An artwork's value is highly dependent on supply and demand. However, artwork prices have continued to rise, especially in the contemporary space. As global demand increases, art prices are quite likely to do the same.
Mike Burle is head of the marine division at Liberty Specialty Markets
Knowing your a-z
a Art Loss Register
n 'nail to nail'
o Chris Ofili
s superstorm Sandy