Insuring companies are making it difficult to insure Art

Art gets harder to insure
Industry caps coverage for art fairs

By Cristina Ruiz

Galleries taking part at fairs such as Frieze could have difficulty insuring the art on their stands in the future. The warning comes from Richard Northcott, executive director of the art, jewellery and private client division at Heath Lambert Group, London, who says that re-insurance companies—firms that protect specialist fine art insurers—are becoming increasingly wary of insuring too much art in any one place at the same time.

“For a long time nobody in the insurance world was monitoring the cumulative value of art shown at fairs or kept in storage,” explains Northcott. “But in the last two or three years the industry has become a lot more sophisticated and a lot more aware of the issue.”

This is partly owing to 9/11 and Hurricane Katrina in 2005, which made insurers aware that a single catastrophe could wipe out an entire art fair or storage facility, and partly owing to recent developments in software that have made it much easier for re-insurers and specialist fine art insurers to track the location of the thousands of policies they have underwritten at any one time.

“There is a limit to the insurance market’s capacity for the cumulative value of policies for a single event like an art fair,” says Northcott. This stands at around $2bn; the insurance value of art at Frieze this year is much lower as the downturn in the contemporary market has led to declining prices, and the many younger galleries exhibiting for the first time are offering less expensive, emerging artists. But he believes that as the art market recovers, “all major art fairs will come under scrutiny by the industry”.

At Art Basel in June, where a single Picasso can be valued at $90m, “there were already murmurs of a problem”, he says.

“One of our clients’ insurers was unable to offer cover because they had already hit their cumulative limit,” says Gigliola Parca, an associate director at Heath Lambert Group. “We were able to secure cover for them from alternative insurers.”

The cap on insurance liability for art kept in one place, known in the industry as “maximum aggregated value”, has also led to rising insurance prices at specialist art warehouses.

Christie’s, which runs warehouses through its Fine Art Storage Services division, is currently building new facilities in Singapore, at the Freeport located at Changi airport, and in Brooklyn in New York. Both are scheduled to open in January.

“If you are a major collector, it makes little difference to you if your art is stored in London or in Singapore. It may actually be cheaper to store it in Singapore as the insurance costs are likely to be lower for you,” says Northcott.