Is Professional Indemnity Insurance Appropriate for Art and Antique Dealers?

"One of the biggest risks in the antiques sector is harm of items in transit." Photograph: Ryan McVay, Getty Images

The international fine art market used to be such a simple, straightforward place. You bought and sold at auctions in salerooms, in dealers' galleries and at the occasional fair. And the things you bought and sold were traditional pictures, works of art, piece of furniture and books, with the odd flake of jewellery and wine thrown in.

That was so.

At present 'fine art' can mean anything from a pickled shark to a video installation or 3D printed sculpture, the internet expanding auction business firm and dealer catchment areas from the local to the global. The market's function in servicing the relatively new culling investment asset grade has led to a great bargain more than scrutiny from politicians, campaign groups and the media on the upstanding front.

Of course, all of the to a higher place doesn't even begin to tackle the question of endangered species and antiquities or the knock-on effects of increasingly transparent pricing.

All in all, then, art market professionals live in a far more than complex and challenging world than they did a generation ago, and this new age of doing concern brings with it increased risk linked to compliance, cross-border trade, packing, shipping and a lot more. On the upside, fundamental players such as Hiscox at present offer instant online embrace for collections valued upwardly to £250,000, so technology tin also make things simpler and more customer friendly.

De-run a risk Business

In this surroundings, insurance is no longer just a matter of third party, burn down and theft; it'south essential to every aspect of business as firms wait to de-risk their activities.

How practise small fine art and antiques businesses do this without breaking the banking concern? And what do the professionals from the various fields linked to insurance see every bit the primal considerations today and in the future?

The consistent message from all of those ATG spoke to for this characteristic was that, these days, businesses more often than not need professional indemnity insurance. Auctioneers take embraced PI cover for years, but with dealers and others doing business on a global calibration, information technology is something that they, likewise, should consider.

Chris Bentley, director of underwriting for AXA ART Northern Europe, Middle East & Asia Pacific.

Chris Bentley, director of underwriting for AXA Fine art Northern Europe, Middle Due east & Asia Pacific, says in that location is "an increasing appetite" for indemnity insurance. "The breadth of liabilities seems to be widening," Bentley observes. "Client bases for dealers and auction houses are increasingly international which means they will accept more exposure to potential liability on this front."

With information available more than freely online, buyers are far cannier than in the past. "Fifty years ago, if I asked a dealer to sell an item for me, information technology would be hard to find out what they had sold it on for. So if the slice was sold at a much higher price a short fourth dimension afterwards, the dealer wouldn't have much exposure on the negligence front end. Present sellers can admission that information hands on the internet and would be able to challenge the dealer to demand compensation."

This is of particular relevance in the U.s., says Bentley, because the U.s.a. has more than of a tradition of litigation, so those trading there need to be more prepared. For example, a wealthy and influential collector might express an interest in a painting at a gallery, but non commit to purchase information technology or pay a deposit. Withal, if they were to return a calendar month later to observe the painting had been sold, they might feel aggrieved that the dealer had not taken their interest more seriously and consider legal action for compensation on the grounds of professional negligence.

Bentley adds: "Regardless of the merits of the claim, speculative legal approaches of this type are very common in the The states and in these circumstances PI is more probable to cover the price of hiring a lawyer to deal with that. Even if the claim proves to be valid, it is possible that an insurer will cover the costs and award linked to that too."

Alexander Rich, director of fine art insurance for Richard Thompson Insurance Brokers.

Alexander Rich, director of art insurance for Richard Thompson Insurance Brokers, echoes Bentley's views.

"Expertise is the question. There are so many things to know most at present. While the internet has effectively provided a safety net for auction houses, because something advertised with a thumbnail image can raise involvement, the wider internet audition means sleepers are less likely to be missed. Information technology's likewise much easier to go to an art database and find where that object originally came from."

An Issue with Flipping

However, just as Bentley advises, people take had an issue with things they take sold reselling elsewhere not long after for a lot more coin. With this in mind, Rich says he is amazed at how many auctioneers still do not have indemnity insurance. "Proper due diligence is not just a duty, merely a way of de-risking the business and saving coin," he explains.

"We see a lot of consultants who are not taking a position on an item themselves. A consultant'southward policy covers them for professional indemnity, whether their expertise is going to be called into question if things go wrong or not."

Loss adjuster Iain Fairley also thinks that technology and compliance have come up more than into focus on the insurance forepart, merely is equally concerned with the mass of regulations that come up into play equally people trade beyond international borders.

"Clearly there are the new laws relating to materials such as ivory. Just this week I read of a dealer or auctioneer having been jailed, although I believe that he intentionally alleged materials every bit plastic and so on. Meanwhile, rhino horn has been the subject of major thefts from auctioneers and others."

He too warns of other risks on the international front, such as non-payment. "Behind this are the new demands of new markets, particularly the Far East. Their unlike methods of doing business have forced auctioneers to establish that bidders have the means and even the intention to pay for goods."

Equally with all of the experts who talked to ATG, Fairley says that i of the biggest risks is the adventitious harm of items in transit, and this should be cardinal to whatever policy.

"Do not cut corners on packing, especially for international shipment, but also this can utilise to curt-distance shipping. The object is probable to be out of the hands of your chosen shipper and airport forklift drivers are non ballerinas."

Plus Premium

Bentley has noticed an increasing demand for one detail area of insurance, lacking title cover, to protect purchase of artworks that may take a disputed provenance. "Dealers are interested in higher and higher limits, although many insurers will impose a relatively pocket-size cap and an boosted premium. This is in spite of the fact that dealers are typically far more active in pursuing thorough due diligence."

He also argues that insurance embrace is far more transparent for clients these days, which is a bonus for all concerned.

"Insurance policies and their wording are consciously and necessarily far simpler than they used to be. They will usually be presented with very well spaced paragraphs in ten or 12-folio documents. We prioritise existence as clear as possible virtually the cover nosotros provide. Reading these thoroughly really isn't a huge hardship, and policyholders should take the fourth dimension to get through them."

Bentley's terminal piece of advice is about housekeeping. "Put in place robust procedures for administration and take a chance, and update them regularly. Have formal procedures, don't only let it happen organically. Tape keeping is hugely of import for everyone. When things don't go well, you need to know what artworks are and where they came from. This reduces costs for insurers and headaches all round in the result of a claim."

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Source: https://www.antiquestradegazette.com/news/2016/insurance-feature-the-art-and-antiques-market-takes-cover/