The da Vinci coup

Fine art has proved to be largely recession-proof over the past three years, particularly at the more traditional end of the market where demand for the old masters has picked up. Such tangible assets are often seen as a safe haven by investors when stock markets are volatile.

However, there have been fewer big exhibitions through the downturn as sponsorship has dried up. “Various banks have reduced their marketing budget and therefore the sponsorship has not been as big as it was before the financial crisis,” says James MacNaughton, Specie and Fine Art Underwriter at Ascot Underwriting.

Now, with the National Gallery in London showcasing a spectacular collection of Leonardo da Vinci’s rare paintings, the dry spell may finally be over. The show, which runs from 9 November to 5 February 2012, is sponsored by Credit Suisse. “They’ve had fantastic publicity and press because it’s such a blockbuster,” says MacNaughton. “There has never been, in our lifetime, so many of the artist’s paintings under one roof at the same time.”

The exhibition ‘Leonardo da Vinci: Painter at the Court of Milan’, featuring nine of only 15 or 16 paintings known to exist by the master, was five years in the planning. While many other exhibitions have focused on da Vinci as a scientist and inventor, this event celebrates his aims and techniques as a painter.

The two versions of Leonardo’s ‘Virgin of the Rocks’ – belonging to the National Gallery and the Louvre – are being shown together for the first time. It was the restoration of this work that originally inspired the exhibition.

One piece in the collection, a rediscovered painting of Christ that was once owned by King Charles I, was valued by dealers at $200m earlier this year. The highest price ever achieved for a painting sold at auction is thought to be $140m, paid for one of Jackson Pollock’s ‘drip’ paintings in 2006.

Insuring masterpieces

Insuring a hit exhibition like this, which includes extremely high-value paintings on loan from around the world, is where the Lloyd’s market comes in.

Lloyd’s insures up to a third of the global fine art market, including galleries, museums, exhibitions, private collections as well as the infrastructure surrounding the market. This stretches to shippers and packers, auction houses and even framers and restorers.

Pricing the risk is akin to watching an episode of ‘Location, Location, Location’ when you’re buying a property, says MacNaughton. “The equivalent for us would be, ‘know your client, know your client, know your client’, and the rest of it falls into place. We have a rating matrix for our business which is applied to the limits and exposures of the client’s business and in combination with the levels of coverage and wording that is required.”

“The key thing for us is to work out the exposure for a client at the premises along with the applicable security levels,” he continues. “If it’s a museum, gallery or private client it’s their location or locations. We need to know what the top item is and a spread of values across the risk if it involves more than one location.”

The market’s specialist art and specie underwriters also insure the transit of works of art as they are moved from auction houses to private collections or gallery to gallery.

Losses could arise as a result of fire, damage or theft. With values so high in the market it is inevitable that works of art will be targeted by thieves, despite the high levels of security that typically exist.

Often – because they are so well known – stolen paintings reappear at some point in the future, sometimes after hundreds of years.

There has been much controversy over France’s decision to put an export ban on 17th Century artwork ‘The Carrying of the Cross’ by French master Nicolas Tournier. The government claims the painting, on loan by the Weiss Gallery of London, is stolen property and that its whereabouts had been a mystery for nearly 200 years.

“I think it’s fair to say that if someone wants something badly enough they can often find a way of getting it,” says MacNaughton. “The onion ring theory of security is paramount. This is the different layers of security that protect the artwork; the values exposed determine the levels of security.

“Art is extremely well protected in the main but the one word that strikes us time after time is ‘complacency’,” he continues. “As insurers we’re trying to emphasise to our clients that just because they haven’t had a loss – and in some cases that might have been for decades – it doesn’t mean they can get complacent and in any way relax the security or not keep up with risk management and the use of modern technology.”

Since 9/11 art and specie underwriters have seen a growing demand for terrorism cover. Many works of art were destroyed when the World Trade Center collapsed, including 300 sculptures and drawings by Auguste Rodin that were part of the Cantor Fitzgerald collection.

To a large extent pricing for terrorism insurance are determined by location and whether artworks are located in hotspots such as London or New York.