Fine art insurance – what do you need to know?

From a Picasso that’s travelling across the world for an exhibition to a Pollock lent to a gallery by a private collector, art travels more than you might think. And when artwork – in particular high value and fragile pieces – is in transit, insurance becomes a priority.

But what are the concerns affecting the art world when it comes to insurance?

The turning point
In 2014, a fire at Momart warehouse, the East London art transport agency, destroyed nearly £50m of art resulting in a spike for insurance premiums. This fire was a wake-up call for insurers, and they now more closely analyse the risk of storing art in warehouses.

To decrease risk, insurers now recommend ‘not putting all your eggs in one basket’, i.e. not storing a large number of valuable items all under one roof, and the number of freeports has increased as a result.

A bump in the road
When a painting flies, it doesn’t ‘live it up’ in first class. Instead, art is often consigned to the same fate as lowly economy seat holder’s suitcases: the hold.

While you might want to add up your own air miles to qualify for rewards schemes, paintings typically ‘suffer’ when they clock up miles – both from potential damage and ever-rising insurance costs.

It’s the little bumps and knocks that cost in fine art insurance. Inadequate packaging and careless airport officials are often the culprits. Luckily, it’s possible to get works covered for depreciation in value due to damage in transit.

You can limit the risk by choosing a reputable fine art shipper.

In case of catastrophe
As well as any knocks and bumps, the risk of catastrophe could also affect the insurance costs for your artwork. From travelling through Florida and putting your painting at risk of hurricanes, to a trip to LA that necessitates earthquake cover, travelling through certain areas presents specific risks that will up your premiums.

An ‘all risk’ policy might be best if you want to cover a piece from every eventuality, but collectors can work to protect their art, and lower their insurance outgoings, by not moving their paintings so often.

The death effect
When a popular artist dies, the paintings they created in their lifetime are then in limited supply, meaning that they can sometimes increase dramatically in value. Some policies automatically increase the cover on pieces if they have a ‘death of the artist’ clause, so that you’re covered for the increased market value should anything happen.

Is it ‘fair’?
Every year there are various key art fairs, such as TEFAF Maastricht and Art Basel, where significant pieces of art are showcased for key figures and buyers in the industry. Galleries are now struggling to secure insurance for these events, with many now citing insurance as one of their most significant annual outgoings.

How much does it cost?
According to Hiscox, the cost of insuring a non-fragile item is typically 0.01-0.15% of its value. For fragile works, this is slightly higher at 0.03-0.45%. The price, however, can vary, and Bentley recently insured a work worth £6m for £6,000 – this covered a three-month exhibition and the travel from the UK to Europe. These insurance policies can be so costly that the only way this cost can be recovered is when the work is sold.

Who’s responsible?
There is no set arrangement dictating who is in charge of insuring an artwork when it’s in transit from a private sphere to a public sphere, such as a gallery or auction house. Typically there are three options:

1) Extending existing policy, passing on the risk to the temporary owner.

2) Taking out a short policy specifically for the duration of the loan without impacting the existing policy.

3) Leaving it to the other party to insure the item – typically consulting a lawyer or art advisor to inspect their policy first.