Fine arts insurance

In their insurance schemes, insurers must take into account a wide variety of risks, players and situations.

Fine arts insurance: Coverage

1. Permanent collections may benefit from two large types of covers:
   • All Risks guarantee for a full coverage.
   • Tailor-made package policies, for a differentiated approach (fire exclusively, fire + water damage, fire + water damage + burglary, fire + water damage + theft and/or burglary).

   Each guarantee can be extended according to the needs and to the types of activities to include options pertaining to specific tariff systems: breakage of fragile items, transport, stays at third party's place (restorers, framers, photographers, dwellings for private guests), loans for other institutions (exhibitions, fairs), coverage to other addresses (reserves, warehouses), as well as "nail-to-nail" temporary exhibitions.

   Valuable objects such as jewelry and furs are subjected to specific studies and to contract supplements.

2. Temporary exhibitions are covered by two large guarantees with facultative extensions:
   • "Nail to nail" policy for a comprehensive coverage
   • "Simple-stay" cover

Fine arts insurance: Assessment of sums insured

The insurance policy is established according to two formulas:

• The agreed value: Most of the private collections are insured in accordance with this formula "valued at…”. The amount of policies in agreed value is based on an estimate.
• The fair market value: The amount covered by this policy is based on the right market value, which is necessarily determined by a certified expert.

Fine arts insurance and Risk prevention

L'accordéoniste de Pablo Picasso

Works of fine art may suffer a loss of their value following damage, but it is possible to restore them according to their nature and to the scale of the damage. Only after restoration can we determine the devaluation of these objects. Restoration works are at the charge of insurance.

Losses often occur during transport hence the insurance companies' systematic recourse to certified packaging professionals, and the requirement of strict and rigorous compliance to the standards while handling the works of art.

Most of the policies also require from the insured to protect the right of recovery, or subrogation of the insurance company vis-à-vis responsible third parties.

Fine arts insurance: Criteria and means of appraisal of art works

The detailed appraisal in figure or the authenticity certificate involves the responsibility of a professional (an expert or a sales firm) certified by a regulatory authority. This figured expertise is required by insurance companies in the absence of a purchase bill or documentation of the item. It is this value that defines the insurance amount.

While the annual insurance costs of paintings may range between 0.1% and 0.5% of their agreed value, these very same costs oscillate between 0.80 and 1‰ during the so-called temporary «nail-to-nail» exhibitions. In such events, the fees could soar to 650 000 USD per painting.

The other assessment criteria are the fragility of the object, the destination and the duration of the exhibition, the type of transport, terrorism risks...

Fine arts insurance and terrorism risks

In the United States, a traveling exhibition of the English painter Turner, scheduled in 2006 between the Cleveland Museum of Art, the Metropolitan Museum of New York, the National Gallery of Art of Washington and the Los Angeles Country Museum, has been postponed sine die as the last three mentioned museums were unable to underwrite the terrorism guarantee. The Cleveland Museum was the only one able to pay the 800 000 USD premium required from it. The exhibition should be insured for the amount exceeding one billion USD.

This overheated tariff trend is accounted for by the expiry in 2006 of the «Terrorism Act Insurance», a provision authorizing the American government to refund insurance companies up to 100 billion USD in damages beyond a 15 billion threshold.

Amidst a mood of uncertainty over the renewal of this law, insurers have adopted a cautious attitude, hence the soaring premiums.