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Personal Risk Management

Fine Art Risk Management and Insurance Planning Guide

Kurt Thoennessen | July 26, 2019

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Art is different from other personal property, such as furniture, electronics, and clothing. It is meant to be appreciated more than it is meant to be used. Its values can be in the hundreds of dollars or in the millions, and pieces vary in size from the very small to something that requires its own building to house it.

Art is also unique, with only one of its kind in existence, unlike personal property that is replicated many times over. It is this one-of-a-kind characteristic of art that makes it so valuable and worth protecting. Just as people fall in love with each other, they fall in love with art, and that love is very hard to duplicate.

Protecting art can be simple or complex, depending on the size of a collection. One or two paintings can easily be protected with careful installation, but collections valued in the millions with many works require much more care to ensure each piece is safe. This article will provide an overview of the strategies and techniques that should be considered when caring for artwork, no matter the size of the collection or objects' values.

Art in Transit

Once a piece is purchased, its journey begins. It could travel straight from the gallery to the place where it will be displayed, or there could be several stops along the way. A collector might also move an object or several objects from one residence to another or loan their works to a museum. In any case, the artwork will be moved over land, sea, or air to get to its destination, and that movement is when most losses to art occur.

A packer/shipper could drop the artwork, the piece could be stolen along the way, or a storage unit where the art is being stored for a time could suffer flooding or fire. These additional risks, that are inherent whenever art travels, pose a great threat to the art and need to be considered prior to moving the art. The following are key strategies to help ensure the artwork is moved safely and is well protected during the move.

  • Have a professional conduct pre- and postcondition inspections on all pieces being moved.
  • Review condition reports before and after the move to ensure the art is delivered without damage.
  • Hire reputable packers and shippers to move the artwork. Nonspecialized shippers are not going to have the proper procedures in place to ensure the art is transported safely.
  • Have custom crates built for high-value works of art. Custom crates enable more sturdy strapping to prevent movement during transit.
  • Obtain images of the art in the storage container it will travel in to identify any loose tools or articles that may shift during the trip and damage the art.
  • Review insurance policies to ensure the art is covered before the move and the value is adequate to cover a total loss.

No one is going to care for someone else's art as much as they do. That is why it is important for collectors and risk managers to have knowledge of the steps and procedures that should be followed when transporting art.

Art on Loan

Galleries, museums, universities, and other organizations are constantly looking for new works to display in their spaces, and art collectors are a great resource for them. Collectors enjoy sharing their collections with these entities for many reasons, including the following.

  • It may help an artist the collector wants to support.
  • It may provide a tax incentive to the collector.
  • The collector can share their passion with others.

Whatever the reason collectors decide to loan their art, the risks they are taking when doing this are great. When the art is hung in a private residence for the enjoyment of its owner, it is far safer than it would be in the halls of a national museum where thousands of people are walking past it each day. Even a more intimate display with handfuls of people viewing the works can bring an increased risk of loss. The following are some steps collectors should take when loaning their art.

  • Have a professional conduct pre- and postcondition inspections on all pieces being loaned.
  • Review condition reports before and after the loan period to ensure the art is returned without damage.
  • Ensure the artwork is packed and shipped by experts in art transportation.
  • Review the loan agreement to ensure it explains where the art will be displayed, for how long, and if it will be moved.
  • Review the entity's emergency response plan.
  • Request a certificate of insurance and details for how the entity's insurance will cover the art while it is in their care, custody, and control. Does it have "wall-to-wall" coverage to cover it in transit? Do they have the proper coverage if the art is being transported by sea or air? Are the limits of coverage on their policy adequate to cover a total loss?

The art world is accustomed to loan arrangements among collectors and institutions as it is an important part of the art ecosystem. Even with this familiarity, however, it is still critical to take steps to ensure art on loan is properly protected.

Art in Storage

There are many reasons why art may be placed in a storage facility. A collector may be moving residences and needs to store their belongings before moving in, they may have a large collection and not enough room to display all of their works, or the art may have been moved to storage as part of an emergency response plan to remove the art from harm's way. Anytime valuable art is placed in storage, the following are a few key strategies to be aware of.

  • Pay attention to the location of the storage facility. Is it located in a high-risk area for flooding, theft, earthquake, or wildfire? A helpful tool to understand the risks in a certain area is
  • Make sure the art is never kept on the floor. It should always be elevated.
  • Review valuable articles/collections insurance policies to ensure adequate cover while the art is in storage.
  • Have a professional conduct pre- and postcondition inspections on all pieces being stored.
  • Review condition reports before and after they are moved to storage to ensure the art is delivered without damage.

Art for Sale

Art is bought and sold through auction houses, private sales, galleries, and estate sales. The following are a few risk management strategies to note during this process.

  • Once a piece is purchased, it should be insured for the sale price without deduction of any discounts or credits. This is to ensure that a piece of similar value could be purchased without relying on any fortuitous discounts received in the past.
  • Make sure a certificate of title or authenticity is received by the purchaser. The art world is fraught with fakes and forgeries, and it is important to ensure the work being purchased is legitimate.
  • Check the art loss registry (the Art Loss Register) for works from time periods when art theft was rampant. Ensuring the title to a piece is clear from theft claims is critical to the purchase process.
  • If a collection is being sold by an estate, be careful not to flood the art market with too many pieces by the same artist. Rather, plan out the sale over time to ensure the artist's value is maintained or even appreciated.

Art Valuation

There are several different valuation methods for artwork. They include the following.

  • Sale and financial planning appraisals to understand what a piece could sell for and assist with the financial planning process
  • Retail replacement value appraisals to ensure the piece is adequately insured
  • Estate tax and planning appraisals for tax reporting, equal distributions among heirs, and donations
  • Damage and loss appraisals to determine the value of a piece after a loss or damage

The Inland Marine Underwriters Association recommends that fine and decorative art be appraised every 5 years or every 2 years for modern and contemporary art. Modern and contemporary art is of concern because the values can increase dramatically very quickly. It is also important to watch for reductions in value. Some art has been declining in value, and as such, their values on insurance policies could be reduced as well.

Art Disaster Preparedness

The best time to plan for a disaster is before it happens. Businesses have disaster plans to tell them exactly what to do in the event of a flood, fire, or other disaster. Art collectors should have similar plans, especially when they are located near a coastline that has hurricane risk or in wildfire-prone areas. Collectors should work with a risk manager to understand the risks their collections face and design a plan to get them out of harm's way when the situation arises. Collectors who have notified the parties who would be involved with their disaster plan—like fire departments, packers, and shippers—are more likely to avoid devastating losses than those who do not.

Art on Yachts and in Aircraft

Collectors may own yachts or private aircraft where they display their art as well. These environments bring additional risks that should be contemplated to protect the art. Turbulence in the air could cause damage to art that is not securely hung, and the sea air could cause mold spores to grow on art placed in a yacht. Although insurance policies can be designed to cover these situations, they may have conditions that preclude coverage for certain types of losses. In those cases, risk management strategies can be used to protect the art.

Art Maintenance and Conservation

Oil on canvas, metal, fermented liquid, blood, horse hair, formaldehyde, or wood—these are all examples of mediums used by artists that can decay, melt, chemically react, or corrode over time, which can change the aesthetic of an object. How quickly these changes occur depends to a great extent on the environment that the art is stored in.

For example, a painting stored in the hot and wet climate in Florida can easily grow mold spores very quickly if the piece is not kept in a cool, dry environment. A bottle of wine that is subjected to high temperatures can quickly spoil, and a painting that is hung in direct sunlight for several hours each day will fade and discolor. These are material changes that can easily happen if care is not given to the maintenance of a collection.

Collectors should work with conservationists to ensure their valuable objects are being maintained and cared for to ensure they can stand the test of time. They should also maintain condition reports on each piece from year to year to understand how a work is being impacted by the environment.

Art Insurance Coverage

Risk management tactics will help protect artwork, but when a loss occurs, having the proper insurance coverage in place will help ensure a collector is well protected from financial loss. The following are examples of coverages that are specifically designed to protect art that collectors should be aware of.

  • Agreed value coverage. This coverage places a value on a work at coverage inception based on the purchase price or retail replacement appraisal versus determining the value after a loss.
  • Diminished value coverage. This coverage will provide payment for the loss in value a work of art experiences due to damage from a loss.
  • Market value appreciation. If the market value of a piece has increased substantially from what it was insured for at the time of a loss, this coverage may enable the limit to be extended above the agreed value to account for this appreciation.
  • All-risk coverage. This is a broad policy form that covers all that is not excluded in the contract. Some common exclusions include gradual loss, wear and tear, confiscation, intentional loss, misappropriation, nuclear hazards, chemical hazards, acts of war, and shipments by mail.
  • Newly acquired objects coverage. This provides some coverage automatically for a short period of time after a new work of art is purchased without having to notify the company.
  • Title defense. Title claims from unknown sources can be costly to defend when they arise. This coverage will pay the costs of research and defense when a collector's ownership of a work is challenged.

Once the best policy terms are determined, a collector can choose between scheduled and blanket coverage to protect their collection.

  • Scheduled coverage provides each work of art its own place on the insurance policy and includes a description (e.g., title, artist, dimensions, etc.) and an agreed value for the work.
  • Blanket coverage allows the collector to cover their art without listing each work individually as they would with scheduled coverage. They would simply choose a limit of coverage that will cover either a portion of their collection or all of it. One thing to note about blanket coverage is that it includes a limit per item that it will not pay above. This per-item limit varies in the insurance marketplace and can sometimes be increased for an additional premium.


Whether a collector purchases art as an investment to gain financially from its appreciation in value or they acquire their objects because they fall in love with them, the art has a value that needs to be protected. Protecting art entails implementing loss-prevention strategies and having an awareness of the environment and how it impacts the art and insurance protection that will provide the resources needed to rebuild or repair a collection after a loss. If all or some of these protections are executed, the risks that a collection faces throughout its life will be significantly reduced and lead to many more years of enjoyment for its viewers.

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