Fluctuating value: make sure your insurance policy keeps pace

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Detail Chariot Giacometti. Image Source Sothebys

The recent sale of Chariot by Alberto Giacometti at Sotheby’s New York for US$101 million has prompted many collectors to go back and question year-old appraisals of their Giacomettis because the movement in price is so extreme, says Martin Hartley, executive vice president and chief operating officer of US-based member-owned PURE insurance.

“One of the most important things you can do as an art collector is to make sure you’re insuring for the right value,” he said. “This is a real issue in the market today as there is a trend for fluctuating valuations. Some classes of fine art and antiques are stagnant or down, others are rocketing. For instance, the increased interest in Asian art is being drive by a wealthier Asian population, and prices of Asian classical art seem to be soaring – so if you own a 17th Century Buddha you should probably think about what’s happening to the value of that.

“One of the things that is most challenging for a collector in terms of the risks they face is that they may be insuring $5million of art today but tomorrow it may be worth $7million or $10million.”

“One of the things that is most challenging for a collector in terms of the risks they face is that they may be insuring $5million of art today but tomorrow it may be worth $7million or $10million.”

Among other things, PURE’s collection management services help clients understand the value of their collections, providing support in finding the right valuer, negotiating favourable terms and helping members get valuations carried out.

PURE also provides appreciation coverage, so that if at the time of loss a piece has gone up in value, PURE will pay out up to another 50% on top of what the piece was insured for.

“We understand that the valuations are not easy to keep up with so we provide this coverage to give some cushion to say if valuations have snuck up on you we will provide that additional coverage,” said Hartley.

The other key element collectors should ensure they have in place is depreciation coverage, he added. If a piece of art sustains even minor damage, its value will be significantly impacted – but the majority of insurers do not cover against this.

“A lot of people don’t have depreciation coverage. A lot of damage to art is partial and can fairly inexpensively be restored or repaired but the real loss is in the fall in market value as a result of that. If you had a $100,000 painting and it got scratched, bringing its value down to $10,000, you would essentially have lost $90,000 in value. Our policy would cover that fall in value.”