The art of insuring collectables
A Stanley Pinker painting sold for a record price in March, signalling an increase in the value of collections that can be covered only by specialist insurance policies.
Arare and undocumented painting by the celebrated South African artist Stanley Pinker set a new world record for the artist in a March auction. The painting, Love, caused a heated exchange between telephone bidders and buyers in a packed Strauss & Co auction room, until finally its lucky new owner walked away with the piece for R3.4 million. The piece was valued at R500 000. The sale is an example of the increasing value of appreciating assets that brokers should take notice of, says Artinsure managing director Gordon Massie. “Most insurance providers, including high net ones, don’t have adequate claims systems for appreciable assets like art and collections,” he says, noting the infrastructure of valuation, damage assessment, restorative teams and recovery network employed at Artinsure. “Brokers who rely on household insurance valuations are not adequate.” Christelle Fourie, managing director of MUA Insurance Acceptances, agrees. “Standard household cover is not enough to ensure that valuable collections receive appropriate amount insurance cover,” she says. According to her, standard homeowners’ policies usually have a per- item limit or inner contents limits of, for example, 10 per cent of the sum insured, which falls far short of the full replacement value for the collection. As a result, it is better to have a policy that provides coverage designed specifically for the collection should something happen to those distinctive or rate items. But, the benefit does not stop there. She says the number of special extensions available through such providers is also important. “A specialist insurer can provide additional coverage such as the depreciation of art, or even a premium for the death of the artist, where the sum insured is automatically increased by 150 per cent in the year following the death.” In this way, Fourie says it is important to obtain professional valuation of the items at the inception of the policy. “A properly documented inventory of items and up- to- date valuation certificates are the most important assets when filing a claim for valuables, as they are almost always a requirement by insurers at the time of a loss.” The necessity of up- to- date valuation records cannot be overlooked. According to Massie, the increasing value of pieces, such as the Pinker painting, demands a re- evaluation of the worth of collectibles. “Brokers whose clients have old valuations may need to re- adjust that figure,” he says. The potential need for restoration or repairs is another benefit of specialist insurance cover, Fourie says. “In the event of restorations or repairs on collectable items, specialist insurers typically have contacts with artisans and experts who understand the value and delicacy of the restoration process.” With the increasingly eclectic collections of today’s market, a broader range of priceless items will need such specialist cover. While the biggest collection values are still in art, particularly oil paintings, Massie says toys, wine and whisky are covered with Artinsure, as well as more diverse collections including Star Wars memorabilia and political ephemera. Indeed, a study from Barclays Wealth and Investment finds that high net worth individuals are increasingly collecting such diverse items. It also found that these collectors are as attached to their items as much as assets as passion pieces. For this reason, many collectors may not seek to replace their items in the event of a catastrophic loss. “Some consumers have no intention to replace certain valuables, especially items that have been inherited, as the true value is sentimental,” explains Fourie. This assigned value highlights the key reason collectors need specialist insurance expertise, says Massie. “To all of our clients, their item is restorable but not replaceable,” he says. “That is a key problem in the market, where insurers who are not specialists talk about replacing items that are not replaceable. Replacement is not something in our dictionary,” Massie concludes.