Fine art and specie market – what are the key trends?

Between Omicron, NFTs and climate change – there's a lot to think about

Fine art and specie market – what are the key trends?

Insurance News

By Mia Wallace

Having served the market for over a decade now, David Saillen (pictured), head of fine art and specie, Continental Europe at Liberty Specialty Markets (Liberty) has seen first-hand the advantages that come with operating in the space. It’s a beautiful line of business, he said, and having studied as an economist, when he started work in the market it really was a case of love at first sight.

The fine art and specie world allows him and his team to work with a fascinating blend of clients and underlying assets, and to utilise a range of skills to understand the objects they are insuring – and not just how to insure them but also how best to protect and conserve them. Working with so many rarities, treasures and precious items is a fantastic part of his job, Saillen said, as has been the opportunity to establish a greenfield operation for Liberty in Europe across this line of business.

This also gave me the possibility to build up [the business] with the approach that I believe is the right one to install, and to have the philosophy and approach towards clients and client service that I believe is the right one,” he said. “And so far, I think it has paid off as we have been able to develop a very strong proposition for Liberty in Europe, and surely are recognised today as one of the leading fine art insurers for Europe.”

Saillen noted that what differentiates Liberty’s approach is that where many competitors have moved towards standardising their products and favouring a product view approach over a client-centric approach, Liberty has moved in the opposite direction. His decision to do so centred on the fact that the type of clients the team deals with are more likely to have needs that require a tailor-made solution. The key, he said, is to take the time to understand the needs of each client and build their coverage in line with those requirements.

As with most lines of insurance, this market does not tend to evolve particularly swiftly but one of the integral benefits that comes with working in the fine art and specie space is that it offers a long-term perspective on the wider world. The market offers a cross-section of how the world has changed over 100s of years, he said, as well as healthy insights into the enduring role of craftsmanship, professionalism and broadmindedness.

“Even looking to NFTs [Non-Fungible Tokens],” he said, “when you talk to art experts, a lot of people in the market say there’s no quality there and it’s not going to last, or that it has nothing to do with art. But honestly, we don’t know, as [we don’t know] what people threw at Galileo Galilei when he said that actually the earth circles the sun, not the other way around. We can criticise from our point of view today, but what history is going to value is a different story.”

Having that long-term perspective offers Saillen and his team the opportunity to think more broadly and objectively about where the market currently stands, and how to protect the interests of their clients. Though Liberty has been fortunate to enjoy great success during the last two years, he said, COVID has represented a challenging time for the wider market, with exhibitions and art fairs unable to go ahead, and museums and art galleries closed for prolonged periods.

Many businesses had to transition from a very people-orientated sales proposition to an online sales proposition very quickly, which was not an easy journey for them. However, Saillen highlighted that the private collector side of the market, where Liberty has built the major part of its proposition, has not been so hard hit as sales were still able to go ahead – in some areas even increase, as people were online at home for more hours of the day.

Given the surge of Omicron, Saillen said, the question of whether or not the physical marketplace will be able to return to pre-COVID levels is still very much up in the air. Whatever the longer-term configuration of the fine art and specie marketplace, the insurance industry is still having to grapple with the risks associated with its current form and the implications of a strongly digital-first, virtual environment, particularly when it comes to concerns such as cyberattacks.

“We, as an insurance industry, have become very careful and very defensive in underwriting because of the potential aggregates and accumulation that a global incident could have,” he said. “That’s certainly one of the big challenges where we have to understand what we’re heading towards. Then there are many new developments coming as well. We’ve had blockchain and crypto assets with us for four or five years (at least per the public perception) and now we have [NFTs] becoming a major topic in the art world.”

These new developments bring with them the inherent concern that their current risk profile might pivot as they continue to evolve. The question for the industry is how it can provide coverage for these new types of risks when they are continuing to evolve so rapidly and it’s still such early days. A lot of underwriters in this space will need to have a much deeper education on what blockchain technology and crypto assets actually entail, he said, as well as what potential risks correlate with them.

How the fine art and specie world has been impacted by pandemic risk is a reflection of how this space mirrors the wider macro trends that buffet the macroeconomic and social environment. Ongoing systemic risks, such as cyber attacks and climate change, are having bearings on specie, while geopolitical tensions are also creating concerns. While not as hard hit as those underwriting risks such as political violence, fine art and specie underwriters are having to continuously analyse exposures to stay ahead of the curve.  

“So, we need to properly analyse what our exposure looks like today, how we could be affected in certain regions, what the impacts are of tightening sanctions rules and sanction guidelines,” he said. [And], also how we need to answer that to be sure that we operate and we deal in a compliant way with all the potential risks that are coming from that.

“So there are a lot of challenges in front of us, but I think there are also a lot of opportunities. And when we [see the end of COVID] and we can open again and move out of the COVID state into a more ‘normal’ state, then there [will be] a lot of opportunities for us to restart doing business a little more like the way we used to, rather than the way we have for the last two years.”

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