KATRINA threatened to paint a dark picture for fine art insurer

Christiane Fischer, CEO of AXA Art Insurance, was in Chicago when Hurricane Katrina hit the Gulf Coast in August 2005, but that doesn’t mean the giant storm was off her radar screen. In town for a meeting of the Chicago Conservation Center—she sits on its advisory board—Fischer was well aware of the danger Katrina posed, and of how much was at stake for her company, which had significant exposure in New Orleans and the Gulf Coast.

As an insurer, art and collections are AXA Art’s only business. Its accounts include the New Orleans Museum of Art (NOMA), for which it provided $100 million in fine art coverage. Although she and her staff were monitoring the storm, Fischer knew there was not much she could do as Katrina churned towards the Louisiana/Mississippi coast. With her colleagues at the Chicago Conservation Center, however, she discussed recovery plans that could be implemented once they knew the extent of the damage the storm would eventually cause. Then she headed back to New York for a vacation with her family upstate. Needless to say, the vacation was short-lived.

“I drove upstate to meet my family and Tuesday morning the levees broke,” Fischer said. “And I got a phone call from my office and turned on the television and I saw the images and it was all very, very confusing. … I turned to my husband and said ‘that’s the end of my vacation for the time being, I’m heading back to New York.'”

Fischer and her staff put their disaster plan in motion and began to line up resources. “As more and more information became available … it became clear there were two risks basically—one was the looting, because that had started at this point, and the second one was the fact that we quickly needed to assess what of our risks were actually underwater and what could be saved and done.” The museum had an art storage area in the basement and at that point they had no idea whether the museum itself was flooded.

“I can’t praise AXA higher,” said NOMA Director John Bullard. He added that from the outset, the insurer committed to spending $1 million to protect the museum with no expectation it would get that money back.

The storm strikes

Bullard was in Maine when Katrina made landfall; Fischer contacted him there and they discussed a plan of action. He was also in touch with members of his staff, including the museum’s assistant director, Jackie Sullivan, who directed the execution of NOMA’s hurricane preparedness plan. NOMA is situated in a vast 1,500-acre park on one of the highest points of land in the city, Bullard said, and he felt it unlikely that the museum would flood. Still, disaster preparations included making sure everything in the art storage room was up off the floor, as well as moving works of art out of galleries with skylights, and moving outdoor sculptures inside where possible and securing those that can’t be moved.

“Eight of our staff agreed to stay in the museum,” Bullard said. “And our policy in the past has always been to bring their families in to the museum so they’re not worried about them.” Staff members—security personnel, engineers and custodial staff—remained in the facility and were in contact with Bullard from Saturday through Monday. However, by Tuesday when the city started flooding telecommunications no longer worked. Federal Emergency Management Agency officials came to the museum and told the staff to evacuate, Bullard said, but his employees refused to leave the museum unguarded.

Meanwhile, in New York, Fischer and her staff lined up resources and attempted to contact other clients in the hurricane zone.

“I called the Chicago Conservation Center and said, ‘I think the best thing that you can do is get your hands on as many trucks [as you can] and just send them down there,'” Fischer explained. “And the CEO said to me, ‘but I don’t have any orders from any insurance companies yet.’ And I said, ‘I wouldn’t worry, I’m pretty sure you will get them. But by the time everybody knows where to send you and where to assess the damages you will already be physically there and you can help quicker.’ Because what is crucial for art is that it gets stabilized if it’s damaged, if it’s either a little wet or the humidity has gotten to it, the quicker one can do something, triage it and stabilize the situation the better it is.”

She also sent a security crew to New Orleans to protect the museum and the company’s other risks. The security personnel were in the area by Thursday after the storm hit, but were unable to enter New Orleans until Saturday. “They were supplied with the locations where we insured, and they would go to these locations, take images and give a description of the situation that they found,” she said. “Then they up-loaded it onto their cell phones and sent it to us so we could know very quickly and assess what the situation was.”

They were able to go to a gallery, for example, and determine whether it had been looted, whether or not windows were intact, or if water had penetrated the building. If they found a damaged location and said, “the door was broken in or blown out and there seems to be nothing vandalized but everybody can walk in, then we would tell them to board up the entrance or to board up the windows,” she said. If they went to a private home and the owners couldn’t be contacted for authorization to enter, a security guard was posted there to physically protect the house. “All different scenarios depending on what each situation was,” Fischer said.

Eventually the National Guard “came to the museum and forced our staff and their families to evacuate the museum,” Bullard said.

“They took them out by helicopter because at that time the roads around the museum were under water. They took them to a staging area on I-10 where unfortunately our staff and their families sat for three days in 90-degree [heat] waiting for buses to evacuate them. They would have been much safer staying at the museum because … there were working emergency lights and there was plenty of water.”

With the security crew finally in place at the museum it was still without a working climate control system, and Fischer knew the heat and humidity were a huge danger to the works of art. On Sept. 9 they succeeded in hauling in a rented generator. “From that day on we powered the museum and got its electricity back. By powering the museum, the humidity control came back on, the sump pump started working, we could stabilize the art work, and things started to normalize. We knew that the worst possible situation was avoided,” Fischer said.

The security crew stayed at the museum for two and a half to three months. “Not just to protect it so that nobody comes in but to help us from far away with the logistics that needed to be done,” Fischer said. They were able to report on the condition of the basement, for instance, and to move pieces that were in danger when water eventually started accumulating there.

Since it was one of the only “normalized” locations in town, the museum also became a repository for the safekeeping of artworks brought in from all over the area. “We brought in about 1,000 works of art that belonged to private collectors, and also an exhibit that was on at the Contemporary Art Center. Works on loan from collectors and artists around the country were brought in for safekeeping,” Bullard said.

Fischer noted that bringing in artwork from other collections caused other headaches “because collections would be brought to the museum that were not our clients’, which was fine, but the museum being our client, there were custody and control issues. … So we had to make sure that this was all coordinated and everything was in good order.”

The museum’s sculpture garden, which contains works by artists such as Henry Moore and Renoir, suffered the most damage from the storm. It flooded and lost much of its vegetation, including a couple dozen trees, Bullard said. A large, contemporary, 45-foot high sculpture constructed of tubular steel and steel cables was twisted, blown over and submerged by the storm.

Some of the works stored in the basement sustained damaged from moisture even though they were not under water. “The works were stored approximately three inches off the ground and the water never accumulated that high,” Fischer said. “But water was on the ground and a lot of the works … were covered with big cloth canvas pieces to protect them from air.” Some of the ties on the cloth covers reached to the floor. The water wicked up the ties and into the cloth covers, damaging to the art. Fischer said the company learned from the experience about “what to tell people to be careful about and what to look out for.”

Warehouse blues

Most of the company’s losses in New Orleans were warehouse losses. “That was a learning curve for us from an underwriting point of view,” Fischer said. “We did have losses in private homes. … But for the large part, our flood zone underwriting had been solid, so we didn’t have a lot of risks in flood zone areas.”

However, warehouse locations had been added to many policies covering a primary location that was in a non-flood zone, she said. Unfortunately, the company failed to check and see whether the warehouses were in a flood zone.

“These warehouses are not built in the most prosperous parts of town so a large part of them were in the areas that got flooded,” Fischer said. “And then we had problems because we had difficulty accessing the warehouses, to get permission by the owners to go in. A lot of them had blown-in windows and [water] was raining in or seeping in, not just necessarily from the flood, but really from the wind. And there were warehouses where it took us weeks to get access to.”

She described the condition of a print collection stored in a damaged warehouse. “It was just covered in mold, it was a total loss. It had no issue from water damage, but just because it was sitting in a warehouse where it was 125 degrees and whatever the humidity level was, mold spread so quickly that nothing could be saved.”

Because of that experience the company is working “with warehouse owners to make sure we can find them, to get quicker access to people, to help them establish disaster plans,” Fischer said. “That’s our big thing. Now we go to people and say look, we want to work with you to put a plan in place that will help you and will help us at the end of the day so we can react quickly.”

The company is also working on a case-by-case basis with clients on plans to protect their art or move it out before a disaster strikes. “We are very strict and if we see that people don’t put preventive measures in place then we will withdraw from the risk or we will exclude water and wind in its entirety,” she said.

The price of protection

Bullard estimated the security company cost AXA Art around $15,000 a day and about $500,000 total. The generator and the “very large supply of diesel fuel” to operate it also added to the price of protecting the museum’s collections.

“We were able to convince FEMA that it was appropriate that the cost of the security and the generating costs and the diesel fuel, which was very expensive,” should be reimbursed, Bullard said. So the museum was able to return to AXA Art much of the expense the company incurred for the security and energy generation.

Today, NOMA is up and running, albeit with less than half its pre-Katrina staff. Bullard estimated about $1.5 million in lost revenues during the six months that the museum was closed—it reopened on a limited basis on March 3.

In late 2005, NOMA embarked on a $15 million fund raising campaign and so far has been able to raise more than $6 million. Much of that amount was raised with AXA Art’s help, Bullard said. The insurer sponsored an exhibit, “200 Years of Art in Louisiana, From the Battle of New Orleans to Katrina,” held last spring in one of the New York City buildings owned by AXA. In addition it underwrote the cost of a fund raising event in New York through which the museum raised about $850,000.