We help many of our clients with their art collections, which are often extremely valuable and sometimes spread all over the world. We spoke to Jolyon Lord of Hiscox Insurance about what specialist insurance is required and the most common types of claims. Jolyon also shared some of the more unusual claims he has seen…
At what point does an art collection or piece of art require specialist insurance?
A regular home owner’s policy will generally only offer limited cover for valuable items such as fine art and collectibles with very low limits. A collector should be looking for cover that addresses the risks that their collection presents and coverage that provides for the specialist needs of a fine art collection. A specialist policy will offer far greater cover and, importantly, if there is a loss it will help the collector to mitigate any further loss to the piece, assist with finding the correct restorer and pay out any loss in value if restoration is possible.
Is additional insurance required if art is being moved?
Moving or “transiting” is the most perilous moment in the life of a work of art and therefore presents the most risk. A specialist fine art insurance policy may include a predetermined transit limit with warranties that the item must be packed, moved and shipped by approved professional packers. If this cover is not provided for in the policy the collector will need to advise their insurers that a piece is being moved and an additional premium will be charged. The rate that is charged will be determined by the type of art (fragile or non), the way in which it will travel (land, air, sea) and the distance, some warranties will apply.
How can you make art works accessible without losing insurance cover?
If the collector wishes to lend art to a museum or institution then they can ask the insurer to add that location to the policy, but the security, fire prevention and general precautions to keep the piece safe from theft or damage will need to be taken into consideration first. Alternatively if it is a museum or institution with art already in place then the piece(s) being lent could be placed under the museum’s insurance policy. In this case the collector should ensure that cover is at least as comprehensive as their own cover and that they are noted as the loss payee on the museum’s policy.
What constitutes ‘art’ when being assessed by a possible insurer?
“Drawings, paintings and sculptures that are admired for their beauty and have no practical use” – Cambridge English Dictionary.
Art has many descriptions. It may be a sculpture, a painting on canvas, a photograph or a ceramic vase. They may be made of precious metals, precious stones or everyday materials, like paper or clay. Some are ancient and others are the work of living artists. The one thing all of the qualifying objects have in common is that their value goes well beyond an ordinary function or material, while this may be subjective in the world of art, a collector might need a specialist policy if they have:
- A unique item that will be difficult or impossible to replace
- A collection of objects whose value would drop if one piece were damaged or lost
- Valuable items held in storage
- Fragile, delicate or very old, original items
What is the most usual type of claim received? And what has been the strangest claim you were able to settle?
Most losses that we see are accidental damage, for example a leak from a floor above will cause staining to a painting which will need to be restored, or as previously mentioned whilst in transit where the item has been poorly handled. Theft is less of an issue for art if the right security is in place and it is difficult to sell or “fence” the stolen pieces as they will be unique and likely have a trail of provenance. Jewellery and precious metals are at greater risk of being stolen as they are relatively easy to move one. I would say that whilst in situ, fire is the biggest risk that a collection faces; so much of art is made of highly flammable materials that are also generally quite fragile. It is not just the fire itself but the damage caused by the water used to distinguish it.
We have seen many unusual claims such as cleaners “helpfully” wiping fat off a painting worth many millions, or watercolour paintings being hung next to a sauna!
One of the most amusing incidents involved a truck load of paintings worth around USD$500,000 being transited from one city in Latin America to another for an exhibition. The truck was stolen along the way while the driver stepped away for a coffee break. A few miles up the road the thieves removed all the paintings from the truck and left them by the side of the road with no damage at all and all were recovered……the truck, probably worth a few thousand dollars, was never seen again!
What documentation is needed to insure an art collection?
Ideally we would like to see a proposal form that lays out the following:
- Who is the insured?
- What is the art?
- Where is the art?
- What is the security and fire prevention?
- Have there been any losses in the last 5 years?
- A recent valuation from a reputable valuer, dealer or auction house would be perfect, but we are pragmatic and understand that this is not always available. Our policy is on an agreed value basis and has an onus of proof of value and ownership, so this is taken care of at the time of loss but it is recommended that collectors keep their values up to date for their own protection and benefit.
You will be able to obtain a proposal from your broker.
Hiscox is an international specialist insurer, underwriting a diverse range of personal and commercial insurance risks.
It has a long history and expertise in providing specialist home insurance cover for homes and their contents, valuables and collections. It is one of the largest insurers of fine art in Europe and its client list includes members of royal families and some of the best known private collectors in the world.
Hiscox Insurance Company (Guernsey) Limited provides a discreet, bespoke service for clients and can be tailored to suit individual needs and circumstances.
Hiscox can also offer you insurance for other high net worth risks such as:
- fragile goods;
- classic cars; and
- high value household items.
Its claims service is unparalleled in the market and it always adopts a fair and sensible approach to claims, priding itself on confidentiality, discretion and tact.
Policies are underwritten by Hiscox Insurance Company (Guernsey) Limited.
A.M. Best has awarded Hiscox Insurance Company (Guernsey) Limited a financial strength rating of A (Excellent) based on Hiscox Guernseys ‘excellent risk-adjusted capitalisation, consistently strong financial performance and strong business profile for the specialist classes written’. It also has an A (Strong) rating from Fitch.