Verdult Art Market Index

Rivalry to write fine arts policies intensifies

Here is an excellent article from "Modern masters of fine art risk" which discusses the requirement for insurance on your art collections.

As margins shrink and the rivalry to write fine arts policies intensifies, specialty firms compete against industry insurance and brokerage giants. The prize: to handle collections belonging to museums, cultural institutions, nonprofit organizations and high-net worth individuals. As the price of art escalates and the risks increase, major insurers vie with new kinds of coverage and changing markets for a bigger slice of what can be a very lucrative business.

At Kansas City's renowned Nelson-Atkins Museum of Art, as at other museums and cultural organizations around the world, putting together a comprehensive insurance program is every bit as complicated as mounting an important exhibition.

The key person in determining the Nelson-Atkins' fine-arts insurance is Chief Registrar Ann Erbacher, a meticulous veteran of the museum. Staying on top of risk considerations is a regular and important part of Erbscher's job. She must know the precise whereabouts of some 28,000 works of art in the museum's collection, of which only about 10 per cent are on display at any given time.

Rivalry to write fine arts policies intensifies - Part 2

ESCALATING VALUES

Another major factor in the fine-arts insurance market today is the anticipated escalation of prices at auctions this fall in London and New York, principally at Sotheby's and Christie's. Or, more accurately, record-setting and attention-getting prices at the fall auctions will create the expectation that the art market is poised for all upward spike following two unnerving years of general inactivity and flat prices post-Sept. 11. The Impressionist, Modern, and Contemporary. categories, in particular, now appear likely to be market leaders.

In short, results of this fall's major auctions are likely to be a classic double-edged sword for museums.

The first swing of the sword will be the almost automatic obligation to revalue the worth of art collections, if not soon after the auctions, then certainly at museums' annual insurance evaluation.

The second swing is likely to come if--as has been predicted in the press and anticipated by dealers and the auction houses--a new generation of younger, wealthy, determined buyers emerges in force at the fall auctions. This new wave of enthusiastic, knowledgeable collectors will need assistance from the growing number of firms, with insurance companies in the forefront, that already are tailoring services to suit them.

How important is the impact of a steady rise in prices of art in calculating premium prices? "Significant," says the Kimbell Art Museum's vice president and CFO Brenda Cline. "like many other museums, an important part of our annual insurance evaluation is to analyze the impact of rising art prices. It definitely is an important cost consideration."

From the insurance industry side, Nicholas Reynolds, vice president of underwriting for XL Fine Arts and Specie, is convinced that the inexorable rise in art prices over the past 20 years has been the dominant factor in calculating fine-art insurance premiums.

"Art prices have soared more than 20-fold since 1985," says Reynolds, who is based in Chicago. "The major museums, therefore, are feeling price pressure in two ways. Of course, they want to acquire new worlds for their own collections, but the substantial rise of prices curtails what they Call spend. At the same time, the regular rise of art prices in the marketplace have caused the values of museum art collections to increase far beyond the money that is available for insurance purposes."

Insurance art Terms at William Verdult

Art needs to insured separately from ordinary contents. Only those things that can be replaced with reasonable ease can be insured with ordinary replacement value insurance. Art is not replaceable with reasonable ease. Art is unique and original.
Ordinary home insurance or commercial building insurance is not designed to cover art and special items. Art, jewelry, antiques and other valuable and unique items need to be insured with fine art insurance.

Fine art insurance is known professionally as Inland Marine insurance. This is a very old term. Inland Marine insurance has developed over centuries with its own rules and limits. It has become the standard insurance for art, antiques, jewelry, antiquities and rare items that are not replaceable.

Art is normally insured based on a recent appraisal. The appraisal must be done by a qualified person. The owner can insure the item at the appraised value or a lower value… but not a higher value.

Art as an Investment and Insurance

Most recently, according to the Artprice.com charting service, the price of art sold at auction increased 9 percent in the first eight months of this year over the sales recorded in the same year-earlier period. One disquieting element in the arts-prices equation is the resurfacing of talk of art as an investment. Perhaps it was inevitable, with art prices on the march even before the great expectations for the fall auctions, and with stock markets in the United States gyrating without a sense of direction.

More than ever, the toughest questions museum officers and trustees now confront when dealing with fine-arts insurance matters are: What type of policy should be purchased, what should that insurance policy cover, and how can the most effective policy be established?

With few exceptions, most museums and other non-profit groups opt for "all-risk" policies to protect their fine-arts collection. At Hiscox Syndicate 33, says Read, "all risk" literally means coverage of "all physical damage." Terrorism coverage, however, is an exclusion. On commercial risks, the category in which museums fall, the insurer has added a "nuclear/chemical/biological contamination" exclusion.

Until Sept. 11, terrorism insurance was routinely included in most "all-risk" policies. But after the World Trade Center attacks, many insurers began requiring that terrorism insurance be treated as an exclusion--and usually an expensive one. So in November 2002, the U.S. government stepped in and enacted the Terrorism Risk Insurance Act (TRIA), which requires insurers to offer some form of terrorism insurance to their clients, who are free to accept or reject it.

TERROR AND COSTS

Verdult Art Market Index- Art and Insurance

Art and Insurance

According to Alton Perkins, CEO of Wealth Enterprises/ Yazzy's Fine Art Corporation, art needs to be insured separately from ordinary contents. Only those things that can be replaced with reasonable ease can be insured with ordinary replacement value insurance. Art is not replaceable with reasonable ease. Art is unique and original.

Ordinary home insurance or commercial building insurance is not designed to cover art and special items. Art, jewelry, antiques and other valuable and unique items need to be insured with fine art insurance.

Fine art insurance is known professionally as Inland Marine insurance. This is a very old term. Inland Marine insurance has developed over centuries with its own rules and limits. It has become the standard insurance for art, antiques, jewelry, antiquities and rare items that are not replaceable.

According to  thehartford.com website

Q: What is inland marine insurance?