Each month lloyds.com looks at the risks that surround acquiring something out of the ordinary. This month we’re looking at collections.
The museum has come a long way from its origins in Aristotle’s Lyceum and the Mouseion of Alexandria – witness the popular online collection, The World Carrot Museum. The name comes from the Greek word mouseion which means a temple to the Muses, but now, museums and galleries come in all shapes and sizes
The Smithsonian in Washington DC, which claims to be the largest in the world, actually comprises 19 separate museums. But most museums are tiny in comparison. Every town has a small local history museum, and then there are all the esoteric museums that can surprise, delight, or bore, but always provide shelter from the rain.
Diverse range of museums
Within a few miles of Lloyd’s itself there are dozens of museums covering a range of subjects such as childhood, fans, tea & coffee, sewing machines, Sherlock Holmes, canals, fire brigades, Freud, Florence Nightingale, foundlings, garden history, and not forgetting Lloyd’s very own Nelson Collection.
Museums cover a wide range of sizes, subjects, objects and locations, and their insurance needs are equally diverse. There are three main types of museums: independent, regional council-run, and the big national museums. Independent museums buy insurance from the insurance market and they can buy packages that cover all of their insurance requirements, from cover for buildings, collections, exhibitions and temporary loans, through employers' and public liability, to loss of income and trustee’s liability insurance.
The council run museums sometimes buy insurance through the council but increasingly councils are spinning off museum collections into trusts. “These trusts tend to buy more specialist insurance policies than they might have bought when they were part of the council,” says Robert Hepburne-Scott of Blackwall Green (Jewellery and Fine Art), a division of Heath Lambert. “As a result, they often come to the specialist fine art insurance market, and so it is most likely to end up in Lloyd’s. ”
Lloyd's is a specialist fine art insurer
In the UK and in a number of Western countries there are government indemnity schemes for the big national museums. But as Robert Korzinek, fine art expert at Hiscox explains, “they may still need commercial insurance for inwards and outwards loans or top up cover to the government indemnity where it doesn’t cover the full value, or the deductible under such schemes. And where museums are receiving protection from foreign government schemes, if they are unsure about the terms of such cover, they may also buy difference in conditions cover. And the fact that it is a contingent cover will be reflected in the premium.”
The collection is the core of the museum in most cases, and it is here that museums have some flexibility when it comes to insurance cover, says Mr Hepburne-Scott. “For some clients the market value of their collectionsis no longer important. Their key objective is to preserve the objects rather than protecting their asset value. In such an instance, museums can buy insurance for restoration and recovery costs only.”
Accidents do happen
Three 17th century porcelain vases from China were smashed into hundreds of pieces by a visitor who tripped over his shoe laces at the Fitzwilliam Museum in Cambridge. The three vases, which are worth £300,000 were restored and put back on display three months after the accident.
Theft recovery costs include expenses incurred in the museum’s attempts to get back stolen objects, such as an investigation of the theft, legal fees, and the cost of loss adjusters or private investigators, or the issuing of a reward.
Hiscox’s Mr Korzinek says that insurers are increasingly being called upon to provide restoration-only cover, which he explains is a cost effective means of both protecting a museum’s collection and protecting their overstretched budget. “I often say to museums, what would you do when the cheque lands on the doorstep after a claim, and for many museums that is a more difficult question to answer than they think it is going to be. Would they go out and try and replace the object? Many regional museums are highly specialised, so if you are specialising in the local pottery of your particular region, for example, then you may not be able to go out and buy another object with that money. In which case, what are you buying that insurance for?”
Transit biggest risk for collectors
One area where all museums across the world buy insurance is inwards and outwards loans. Mr Korzinek says that the majority of claims for art works are for accidental damage, and they are most at risk when in transit. “Many museums like to place one single policy at the beginning of the year for both their inwards and outwards loans on an adjustable premium – that is, they pay premium relative to how much they use the policy,” he explains.
He adds that Lloyd’s is the pre-eminent market for both European and North American museums, “because when you are looking at museums and exhibitions, you are looking at huge compressed values, plus heavy transit exposure. So you have both size and volatility and that is where a syndicated market thrives.”
