Navigating Insurance for Today’s Contemporary Art Scene

October 3, 2022 by and

As the pandemic recedes, the art market is getting back to business. Record-breaking auction sales, breakthrough success of young contemporary artists, and a range of new material and media used in artists’ creations are hot trends dominating the art scene today.

Art collecting has also diversified in recent years, broadening the appetite of the collector class. Some are new to the market, drawn to artists and the art world through social media. Others are lifelong collectors looking to diversify or build their collections. We also see collectors who simply want to decorate a space, or who look at art as a way to support artists and communities. Some are just looking for an investment opportunity. This broadening demand, combined with a trend toward reappreciation and value adjustment of formerly underrepresented or up-and-coming artists has brought about a well-rounded boost in the art market.

We receive a lot of questions from these collectors about buying and owning art, including how to insure their works. Navigating this new normal in art can be complex — whether you’ve been collecting your whole life or you’re a new collector eager to invest.

Proof of Value

Many fine art insurance policies are written on a scheduled or agreed-value basis, which can often include a percentage increase in coverage that accounts for market fluctuation. This provides collectors with some coverage for appreciation in value over the course of the policy term; however, in the case of contemporary art and emerging artists, where there’s potential for values to double on the secondary market, this coverage enhancement may not always be sufficient to cover the full value of the work.

It is critical that collectors have a pulse on the market for the artists that they collect so they know when it may be necessary to reappraise or to consider increasing insurance coverage, based on appreciation. Proof of that value, such as recent invoices and up-to-date appraisals, are necessary to maintain a proper collections management system. In addition, having access to trusted professionals can only help collectors in protecting their precious objects, as they can advise when it might be appropriate to consider reappraisals based on recent market shifts.

New Material

The use of materials in artwork continues to evolve, leading to new considerations for care and valuation. Last century saw the use of new pigments and acrylics. Today, we’re seeing video displays and digital components in works of art. There are also any number of materials that can be used as 3D elements in a piece.

With the emergence of new materials and media being used by up-and-coming artists, it is also important to note that most fine art insurance policies contain an exclusion for gradual deterioration and inherent vice, which means that if the object will deteriorate naturally over time or bears characteristics that could lead to its own destruction, the damage will likely not be covered by insurance. As a collector of emerging artists, it’s critical to ask about the materials being used, understand how they might withstand the test of time, and learn what options might exist for restoration and repair.

Ensuring that a client’s collection is properly insured through a dedicated fine art and collections policy is not only beneficial from a financial standpoint, but it also provides access to specialized experts (such as conservators, restorers, packer/shippers), in the event of a loss.

How to Protect a Contemporary Art Collection

When collecting art, the risk exposures are generally threefold: financial, physical and emotional.

Financial. When buying contemporary art, it is important to conduct significant due diligence on the work, including its value and ownership history. After an acquisition, we strongly advise collectors to keep all documentation related to their purchase, audit the market to understand trends and fluctuations, and obtain an annual appraised value for the work.

Physical. We recommend consulting with experts on placement or where the art collection is stored — consider if there is climate control, UV or light exposure, how the work will be displayed, and the potential for the risk of theft, fire or water damage. Does the location have risk of a catastrophic event — hurricane, wildfire or flood? Consideration also should be given to the medium — how will the materials wear and tear. Also, if the collection will travel, whether for conservation efforts or to an art fair — what transit will be used, how will it be installed, and how will a piece be packed, are key questions to consider with your insurer.

Emotional. Most artworks are unique and “one of a kind.” In the event of a loss, a collector should make sure that all works are insured to value and that experts who can support restoration or replacement efforts can be consulted.

Top Five Takeaways

If working with art collector clients or insuring assets in this space, be sure to: