Fine Art’s Place in the Insurance Market

Whether it’s in a museum, gallery or in a high-net-worth customer’s home, fine art and collectible items hold special places in the hearts of insureds.

Andrew Gristina, the national segment leader for fine art for Traveler’s Inland Marine, works with artists, collectors, dealers, museums and galleries to help make sure each piece finds suitable coverage in the property/casualty insurance market.

In the following interview with Insurance Journal‘s Andrea Wells, Gristina talked about what’s considered a fine art and collectible item, the criteria used to evaluate such items for proper insurance coverage, the role industry partners play in this process, and why insuring fine art remains a good insurance market.

Insurance Journal: What you consider fine art? Is it something solely based on value?

Andrew Gristina: I use fine art as a catch phrase or a catch-all term, but actually a more appropriate term sometimes is cultural property. It’s really anything that has a value beyond just the cost of the materials. So these can be objects that are historically significant, like documents or archives, or even in some cases sound recordings, those kinds of things. But it’s also flat works. If you think about the most common examples, it’s the old master painting that hangs in a museum, but also outdoor sculpture, antiques, artifacts … fossils and paintings. If you go to a natural history museum that has dinosaur bones, that’s also included in what we consider fine art. And then the property that goes along with that … When you go to a museum, you also have the cases and the infrastructure that they use to display the art. We also work with that.

IJ: What criteria do you consider when you’re evaluating a piece of art for coverage?

Gristina: When we look at a collection for coverage, we’ll look at lots of different components. … the more standard insurance criteria, such as the type of building, protection class, fire protection of the building, security, and we’re also going to look at the type of art that we’re considering. So is it antiques or is it collectibles, or is it contemporary art? We don’t actually do appraisals for art – that’s not our role. What we do is to help the agent understand whether we can validate the values that people have on the collection, and then we look carefully at how the art is being used. Our different policies have different valuations.

For a museum, that’s not in the business of keeping track of the values of all of its art – it’s in the business of displaying art and educating the public – if something were to happen, we figure out what the value is at the time of loss. For dealers who are selling art, then we work with them on more of an inventory basis, and we work with them on a cost-plus basis or a selling less basis to indemnify them. If they’re private collections or corporate collections, something that’s more static, we look at a schedule value.

So when we’re considering all of these, we want to look at who we’re insuring and how they’re using the art to get an appropriate valuation.

IJ: For museums the art may ‘live’ there, but for art galleries artists display their work for a certain period of time. What role does the artist play in insuring his own work while it’s on display?

Gristina: In galleries, where it is sort of a constant flow of art, and it’s inventory, the idea is to get things up. These are objects held for sale, for the most part. Galleries do occasionally do things that aren’t for sale. At most galleries, their inventory is far too fluid to keep on a scheduled value basis, meaning you couldn’t possibly put things on and off the schedule every time you put out something again, or every time you sold something, or every time you took something on consignment or got a new work from a living artist. It would become a paperwork nightmare. We have a policy that’s directed specifically at that industry niche, which has a blanket limit. We talk to them about how much they have in inventory at any one time, and then provide an unscheduled blanket limit on that.

Blanket’s not quite the right term, but unscheduled limit is the correct term – where they don’t have to report to us everything that’s in there. But the important thing is, and it’s important for their agent to understand, that they then have to have very good record keeping as far as inventory goes, so that if there is a loss, they can tell us what was lost, and how, who, where do they get it, what was it valued, (and) if they own it. If they owned it, then we can pay them on their cost plus a certain amount. If it was borrowed from somebody, do they have an agreed amount, a consigned amount for that piece? Or if it’s a living artist, what’s the track record of that artist, so we can establish a value for what was lost?

IJ: Do ‘living’ artists also have their own insurance?

Gristina: They do. Now, with artists, they’re wonderful people and I really enjoy working with artists, but insurance is not something that gets them excited. So, most of them don’t have insurance for their collections. … We do work with some of the well-known names, highly established artists. Most emerging artists are really worried more about creating than they are about insuring their work. So, they turn to the galleries they work with to provide them with insurance. It’s not 100 percent.

IJ: What’s the difference between a conservator, authenticator and an appraiser? What part do they play in the claims process for fine art?

Gristina: Conservators are people that work to manage the ongoing care of art, and if the art has been damaged also (work in) repairing, stabilizing the art, and hopefully bringing it back to the condition that it was before, when possible. Authenticators are a different story. Authentication, it’s a tricky business because there’s a lot of money tied in it. Recently, the Warhol Foundation announced that it was no longer going to do authentications because of the liability. Those groups (authenticators) that try to establish whether or not a work is legitimate are different from conservators who simply try to provide physical care for the objects. Appraisers, who are a different group, are looking at how to manage a market value of a piece, and what the history of a piece is, and what the prominence of a piece is.

IJ: Do you see many agents that are not specialists, or is it a market for agents that focus on the art community?

Gristina: We see both, and both types do a very good job. We work with agents that represent clients on all of their risk … and then we also work with a great group of fine art specialist agents that really focus on just handling their clients’ fine art needs and the risk associated with that. What I find most important for that is that the client and the agent have a good and open relationship where they can talk to each other.

IJ: Lastly, describe the fine art the insurance market today.

Gristina: Fine art is not in a vacuum. It went through the same soft market that the rest of the insurance market went through over the past eight years or so. But it continues to be a profitable line of business, and our loss ratios reflect that.

There are several reasons for that. I think most importantly, it’s because unlike other types of property that you deal with, fine art holds a special place in peoples’ hearts. Very often there is a sentimental attachment to it, or it’s a highly prized object, as opposed to maybe something else that can be replaced. There also is competition in the marketplace, both domestically and from foreign markets, because that loss ratio is so good and because there’s value there. Fine art is, what I like to say to people, is the most valuable property on earth by weight. Not all of it, but some of it. And any time there’s that kind of a value associated and risk associated, there’s a market for insurance.

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