The art of insuring the irreplaceable
Valuable art, collectibles and jewellery are stolen from corporates, collectors and individual home-owners every year. These items may have been bought as investments, or they may have been inherited pieces with both sentimental and financial value. How does one go about insuring such valuable items? Surely a special kind of insurance is needed? COVER spoke to Darrel Dawson, CEO of Santam subsidiary Echelon Private Client Insurance, to find out.
To what extent does Echelon insure fine art and other collectible items?
We insure many wealthy, LSM 10 clients, and a significant number of them have art collections and other valuables to insure. Even bespoke jewellery can in itself be classified as an artwork and must be insured as such. People need to insure items such as coin collections, valuable paintings, stamp collections, vases and ceramics.
Is the theft of art and valuable jewellery from these individuals’ homes a regular occurrence, in Echelon’s experience?
We and other insurers have had a few losses, so it’s not unheard of. However, in South Africa, these thefts are mostly incidental, where the collector’s items are stolen along with other items during a burglary. We’ve never had a break-in where someone has come in and gone straight for the Irma Stern, for example. Items like jewellery and electronic goods are usually targeted, rather than collectors’ items. That said, there was a case widely reported in the press a couple of years ago where a very valuable collection of pens was targeted and stolen.
Are there difficulties associated with insuring such pieces?
Yes. Very often the clients themselves don’t have all the necessary information about the nature and value of an item. There is frequently a large gap between what the client believes the artwork or collectable is worth and its actual value. The important thing is to do considered underwriting and obtain credible valuations upfront. We prefer to consult experts who can confirm authenticity and provide an expert valuation. It is crucial to do this at the outset to ensure we are quoting the right premium for the piece.
One of the most unusual collections which we were asked to insure was a collection of rare comics. The chances of the collection being stolen are slim, but there is always risk of damage by smoke, fire or water. So we had to be careful to provide specific risk mitigation conditions about how the collection should be stored – for example, in a bank vault or water proof display cabinet instead of on a shelf .
Another difficulty is that clients sometimes prefer to be discreet about valuable items they own. So there may be issues of non-disclosure. For example, a client insuring his home contents may not think of mentioning the collection of rare stamps. It is the client’s duty to point out any rare and collectible items to the underwriter and ensure that they are properly valued.
How are intermediaries responding to the need for specialised advice and insurance?
Good intermediaries know who the correct insurers are to refer such risks to. This is crucial, since placing such items with a general insurer may lead to problems such as underinsurance. No-one expects the broker to know the value of a collector’s piece. This is why you need a specialist valuation. For example, if you compare two Pierneef paintings, there may be a big variation in the value of the two pieces depending on factors such as the medium or the scale, which a specialist would be able to determine.
Are specialised products needed to insure collectible items?
For specialist items it is best to go to a specialist insurer from the start. It hinges on the expertise of the underwriter, and the appropriateness of the cover. The intermediary must make sure that the insurance product is an all risks type product that has sufficient indemnity for loss events such as accidental damage.
What role does risk management play in the insurance of art, collectibles and other valuable pieces?
Risk management plays a huge key role. The items must be properly stored, and secured in line with their value. A rare Rene Lalique vase should be carefully and safely displayed, and not standing on a coffee table where it can be knocked over by the family pet.
Katya Smith, COVER journalist