It is widely known that Hurricane Sandy, in 2012, caused large losses in the insurance industry, in part because of the high property values in the storm's path, as well as the population density. This included flooding in the Chelsea neighborhood of Manhattan, which damaged nearly three dozen art galleries, and property damage at storage units and warehouses across the region.
After the storm, it was estimated that there was $300 million Because so much art is only temporarily in Manhattan - either on loan or consignment - the ramifications and insurance claims were worldwide.
After the storm, it was predicted that the art insurance industry would react with higher premiums, which would then taper back to normal. As Robert Salmon of Willis was quoted: “It’s mainly knee-jerk: restrictions, huge deductibles, and rate increases. As we get further from the events, insurers are going to have to tone down that kind of reaction or lose too much business.”
Mr. Salmon's predictions have been borne out. The Art Newspaper is reporting that insurance premiums are now lower than before Hurricane Sandy, in part because of the fierce price competition in the industry and because, as LeConte Moore of DeWitt Stern, a specialist art insurance broker says, "People handle art with care: they put on white gloves, they package it specifically. They take good care of art whether it's a Tiffany lamp or a Picasso." However, underwriting standards are typically stricter and the policies contain greater restrictions and conditions.
If you collect fine art (whether for a personal collection or to display at your business), here are a few tips to remember:
First, understand what coverage you already have. Obtain a copy of your existing homeowner's/renter's insurance or business personal property insurance policy. Read the policy and speak with your insurance broker to find out whether your existing property insurance policies cover fine art. It is likely that fine art is either (1) wholly excluded or (2) subject to a sublimit. Many insurers then offer additional coverage options (usually called a “rider” or “floater”) to add specified fine arts coverage. This may be a blanket floater for all of your fine art, or it may be separate and individual floaters for each work of art (or, obviously, a combination of a blanket with individual floaters on certain works).
Second and related, consider specialty insurance. You may find that your property insurer’s limits are insufficient, or that its policy terms are inadequate. If that is the case, consider working with a specialist art insurer and possibly a specialist art insurance broker. Some specialist insurers will also have employees who can assist you in upgrading your facilities to make it safer to store or display fine art.
Third, know that premiums will likely vary on a number of factors. These include the type of art (some types being more fragile than others), the geographic location (risk of flood, hurricane, or wildfire), the specific location (public display or private collection), whether the art is stored in a vacant facility or not, and how frequently the art will be moved.
Fourth, keep good records. This goes for any insurable collection and, indeed, many other types of insured personal property. In the event of a loss, it will be helpful to have the original bill of sale or receipt, photographs of the item, any appraisals that have ever been done (even if they are “informal” appraisals such as print-outs of similar items sold at auction), and a copy of the item’s provenance (if applicable). Further, in today’s world, it is easy to copy this information electronically and store it remotely where it is safe from natural disasters or fire damage, and can be easily retrieved after a catastrophe.
Fifth, get an appraisal. Depending on the insurance policy, have the art appraised on a semi-regular basis. An appraisal serves two purposes: (1) by knowing the market value of the item, you can adjust your insurance coverage up or down so that you purchase enough insurance (but not too much) and (2) an appraisal will assist in substantiating the value of the item in the event of a loss. Certain insurers will permit you to "self-appraise" and, for some individuals and collectors, this is an easy process because they already have the background knowledge in the field. For the more casual collector, a professional appraisal will be more helpful.