While those in the art world may be on top of what's happening, owners of just a few pieces may not be checking whether they have enough insurance coverage.
Brian Frasca, an insurance broker at the New England Brokerage Corp in Providence, Rhode Island, told of a new client who bought a work of art for a million dollars in 1991. The piece had been insured under a homeowner's policy, which seemed adequate, providing about US$2.5 million of property coverage. But the work was recently appraised at US$10 million.
"We had a US$10 million painting 90 percent underinsured," Frasca said.
Insurance companies typically request appraisals every one to three years on pieces valued at more than US$75,000, but some collectors get appraisals every six months because of the market's volatility, he said.
There are many approaches to insuring fine art and collections, but a typical policy may now provide 150 percent of the insured value, to provide an inflation guard. The typical rate for such insurance is about US$1.20 per US$1,000 in value, according to several insurance brokers.
Some owners balk, however, at keeping appraisals updated.
"One of the most difficult things I have to deal with is trying to convince collectors they should get updated valuations," said Dorit Straus, worldwide fine art manager for the Chubb Group.
A much greater problem, insurance specialists said, is underinsurance on the part of collectors. "The problem is convincing people that anything is going to happen," said Claire Marmion, director of art collection management at the AIG Private Client Group. "They don't think the teddy bear will be eaten by the guard dog or that the elbow will go through the Picasso."
But anything can happen — sometimes where it may be least expected.
RSS