One of the biggest questions art insurers are currently working to answer is how to insure contemporary works that have a limited lifespan. So says Robert Read, head of fine art for Hiscox.
“A lot of contemporary works are created to make an impact and they’re not necessarily works of art that are created to last forever,” he says. “An oil painting on canvas is something that will last hundreds of years, whereas a shark in formaldehyde has got a life span of about 20 years. That does create issues for us in terms of the longevity of the work, and some contemporary pieces are incredibly hard to restore.”
Hiscox is one of the major insurers of fine art, both through homeowners’ policies and through dedicated art policies. Roughly 25% of Hiscox’s art business is made up of the commercial sector – for instance, art dealers, shippers and packers, restores, valuers. The remaining 75% of the insureds are private art collectors. Hiscox considers each potential customer individually.
“If we can satisfy ourselves that these insureds are honest and careful and we’re confident that they can look after it and we’re happy to insure them,” he says.
He adds that there is no specific value a collection has to reach in order to insure it with a separate policy, rather than as part of a homeowner’s policy. The decision depends very much on the policyholder’s individual circumstances.
“If you had a very large collection and it was in the name of a trust, you might want a separate policy for that, rather than having it as part of your homeowner’s policy, which might be in your own individual name,” he says. “Plus, historically people used to place their art separately and some people still do and find it easier to do that. It’s just a matter of servicing whatever the client wants.”
Read says that the market for art insurance is currently stable, with rates relatively soft as a result of increased capacity as insurers seek to capitalise on what has recently been a relatively profitable market.
When taking out art insurance, a vital first step is to make sure you have a clear idea of what exactly you will be insuring.
“A lot of people don’t know what their art is worth,” he says. “They might have inherited it and not looked at it for a long time, and so the first thing is to try and establish the value of what you’ve got.”
He says that when you’re insuring art there are a lot of different options in terms of what you insure it for. For example, you can insure it for probate, which is a fraction of an insurance valuation, which would be based on a high auction estimate.
It is therefore important to be clear about what you want to protect and how they want to protect it – for instance, whether it is important to be able to afford to buy something of a similar quality and standing.
“That is really something that the insurance broker needs to discuss really carefully with the client so that they make the right choice for them,” he says.
By far the biggest area of losses when it comes to art insurance is accidental damage, which accounts for roughly 55% of losses, he says. Common occurrences include damaging art in transit, knocking over a vase, or a painting falling off a wall. For this reason he recommends exercising special care when hanging, displaying or moving your possessions.
Roughly 25% of losses are due to theft, and with this in mind he advises being security conscious.
“The remaining 20% of losses is split evenly between fire losses and water damage,” he says. “We advise clients to check their wiring is secure, and that their checking guttering is cleaned every year. All those issues would help prevent these kinds of losses.”
Asked how the market has changed in recent years, Read highlights increased interest in contemporary art, plus a growing interest in items on the fringes of the art market, such as musical instruments. In general, there is increased interest in investing in art, which, coupled with the limited supply of collectable items, is causing prices at the top end to rise significantly.
“There’s a lot of money chasing a limited number of items,” he says.