With the rebound in financial markets following the financial crisis in 2009, art sales have likewise taken off. New auction records made by paintings and other works are now a common occurrence, seen recently with the record-breaking sale of Leonardo da Vinci’s Salvator Mundi in December.
As the global art community grows, so does the need for insurance policies for collectors. In China, there’s been a growth in museums, which means these institutions are also looking for coverage for their collections. Meanwhile, in the US, “the museum consumption of insurance is static, but many of them are having to increase the coverage they’re carrying because of the escalation in art values,” said Huntington T. Block’s president and CEO, Joe Dunn.
What’s prompting the increase in values and thus, coverage?
The natural inflation of art over time, said Dunn, as well as the consumption of art by new consumers, particularly those in the Persian Gulf, China, and India.
“With the aggregation of wealth in the US and the 1% phenomena, people at the end of the spectrum do have more disposable income, and are buying more art,” said Dunn. “They see it as an asset class and they’re passionate about it, too.”
The top five risks policyholders might face surprisingly doesn’t include theft. In fact, its art that’s on the move that poses the biggest risk.
“85% of our claims are derived from transit losses,” said Dunn. “When you think about art, when it’s on a wall on display or in an individual home, the risk of something happening is pretty minuscule.”
Natural catastrophes are another peril art collectors face, as are acts of terrorism. Dunn has seen collectors and museums in cities like New York City, Los Angeles, and Chicago carry terrorism coverage for their fine art.
Not to say that theft isn’t a risk for art owners. When prices of bronze and copper were escalating a decade ago, Huntington T. Block saw a fair number of losses to outdoor sculptures as the materials were stolen for scrap metal.
No matter what risks they face, creating an insurance policy for an art collector requires one-on-one consultation since every art collection is unique.
“No two collectors are alike and no two collections are alike,” said Dunn. “My preference is they transfer the risk from themselves via an insurance policy to an insurance company that protects that asset class.”