Wednesday, 8 October 2008

Art insurance commentary

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EG Buhrle art theft, Aon Artscope/Specie & Fine Art Division comment on the recent robbery.

Although the recent heist of a number of paintings from a Swiss gallery ended happily with the return of the paintings, the brash move by thieves to just walk into a gallery and remove pictures left a question mark over the security of many fine art works lodged by private individuals in public spaces. Charles Hamilton Stubber, director of Aon Private Risk Management. give us his view of the implications to ultra high net worths, in question and answer style.

What could happen to paintings in a robbery? Paintings will never be able to be sold or exhibited in the open market. Bearing this in mind, the thieves often realize that financial gain is not an option and the art may reappear in a couple of years’ time. Paintings could be used as collateral for loans, possibly for below market value. The FBI estimates that the stolen art market is USD6bn annually. We are not aware the insurance market has ever paid out any ransom demands in an ‘art-napping’ case. Meanwhile, global law enforcement has become increasingly sophisticated in investigating and recovering stolen artwork. The police have linked into organisations such as the Art Loss Register, Trace and other international databases which has stemmed the flow of stolen art. For example, 2007 saw a police sting operation in Paris recover two Picassos, Maya with Doll and Jacqueline.

What could have been done to prevent this theft? Not much because you wouldn’t want a tragedy. However museums have an obligation to create a happy medium by displaying their masterpieces, rather than keeping them locked in a vault, while constantly reviewing and checking the effectiveness of security measures. Smaller locations tend to be at greater risk because exits are more accessible than in a multi-floored large gallery. This is demonstrated by the fact that it has been reported that the EG Buhrle theft took place in just three minutes.

Lessons learnt for other collectors? If loaning a piece to a museum, the collector must extend their policy for when the art is in transit and in its new location, or negotiate for the museum to arrange adequate cover if transferring the liability. From a museum's perspective, it must regularly review the series of events leading up to a loss to reduce their susceptibility. For example, the series of events could include access, number of personnel, a device on the painting and potential exit routes.

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