As we all know, the art world in the past weeks has been disrupted on a global scale. But as the initial clamour dies down and we start to look for ways to move forward, one question comes up again and again: How do we manage the increased risk?
This week we were joined by Adam Prideaux, Director of Hallett Independent. Hallett Independent is one of the top boutique art and heritage insurance brokers.
What Is the Difference Between Insurance and Reinsurance?
The term “reinsurance” has come up quite a lot recently in discussions around COVID-19 claims. Adam kindly clarified what exactly reinsurance is and why it’s become such a topic of discussion during the pandemic.
Reinsurance is insurance for insurers. Insurance is about passing risk from one person to another person. Just as art organizations don’t want to take on all the risk of operating, neither do insurers. That is where reinsurance comes in – it allows insurers to spread out the risk of their clients.
Why Is Reinsurance A COVID-19 Buzzword for Art Organizations?
Reinsurance comes up in the context of the pandemic in two cases:
- Reinsurance Premiums. The Insurance market is often based on the cost of reinsurance premiums. If reinsurance premiums go up due to a global crisis, insurance premiums are also expected to rise.
- Claims. Reinsurers pay out claims made by insurers, who in turn pay out claims made by the organizations they insure. There is not enough capital in either the insurance or the reinsurance markets to pay out all of the claims being made during this period, especially for business interruption insurance.
Do You Have A Valid Business Interruption Insurance Claim?
What steps can you take to pursue a claim on your Business Interruption Insurance?
- Speak to your broker. They should be your first port of call, as they not only sell insurance but are sources of expert advice.
- File your claim. Once you have confirmed your policy covers the pandemic, take the appropriate steps to file your business interruption claim.
What if your claim gets declined?
- Speak to a lawyer. Consider if you should challenge your claim.
- Considering joining an action group or class action. You may find that other organizations with the same insurer believe they have also had their claims wrongfully denied. Some of these businesses are forming groups to pursue the matter further via legal channels.
What Should You Do If Art Gets Stuck Somewhere?
Results of this week’s poll “Art Across Borders.”
One of the art world’s biggest concerns, whether you are a museum or a shipper, is what happens when art gets stuck somewhere due to the pandemic. Adam gave helpful advice on what you should consider to make sure your art stays insured with less hassle and for lower costs.
- Transit Coverage. If you are shipping artworks, you should confirm that your insurance covers them if they were to get stuck in transit. Let’s say you were shipping a painting from New York to Paris. If the painting got delayed in a port in the United Kingdom, would it still be covered?
- Extend Your Insurance On Time. If your art is stranded in storage and cannot be returned to you, what should you do? According to Adam, extend your insurance “as soon as possible.” If you wait to extend your insurance and your coverage expires, you will need to repeat a lot of processes to renew that insurance – including condition reporting. And trying to get condition reports completed for an entire exhibition that is stored across the world isn’t a simple task.
What Measures Can Art Organizations Take To Mitigate Risk During COVID-19?
1. Use A Fine Art Shipper. Many fine art insurance policies include clauses that require art be shipped with an accredited fine art shipper. Although the low prices of couriers (such as Fedex or DHL) may be appealing to cut costs, it is seen as inherently more risky by insurers. Check your policy and confirm that you won’t be voiding your insurance coverage by using a courier.
2. Regular Condition Reports.
“It’s almost inexcusable not to be doing it.”
Condition reports are a key part of making successful fine art claims, whether it’s a contemporary work or ancient art. Especially now, when artwork cannot be seen in person by all parties involved. Whether you are sending art to a buyer, extending your insurance for stranded art, or changing insurers, regular and thorough condition reports will help you to mitigate risk.
3. Check Your Unoccupancy Clause. In many traditional insurances there is an unoccupancy clause that, after 30 days of closure, stops covering things such as flood or fire. Check your policy to see if it includes this clause and, if so, consider discussing it with your insurer.
4. Protect Your Premises. Many of us would assume that because our location is closed there is less risk. Insurers see it as the opposite. What happens if no one checks on the building and there’s a leak? Or a rodent infestation? Below are some tips on how to protect your premises, especially from circumstances that are sometimes excluded on insurance policies.
- Take art out of the windows. Especially valuable works or those sensitive to natural light.
- Make sure your security alarms are working. You can also confer with your security company to confirm functionality.
- Check your fire alarms. Working batteries in your smoke detectors are key.
- Turn off your water. A small leak can, over weeks, cause catastrophic damage.
- Increase your security measures. Not every organization has the budget for 24 hour security personnel. But even installing inexpensive CCTV can mitigate the risk of breakin.
- Pest Control. Rodents and insect infestations are sometimes not covered under policies. Make sure you do a thorough sweep and implement appropriate pest control each time you visit your premises.
5. Reduce Your Transit Limit. If you aren’t sending works around the world or have cancelled your participation in an art fair or exhibition, contact your broker or insurer to reduce your transit limit. Doing this can also help in cost cutting exercises without leaving you at risk.
If you’d like to join us at a future ArtEvolve virtual event,
please visit this link to RSVP: https://bit.ly/2T2Awof
A special thank you to our guest speaker, Adam Prideaux, Director of Hallett Independent.