Insuring Your Collectables: Coverage Available and Loss Case Studies - Daniel Wood Managing Director J. Safra Brokerage Limited

Insuring Your Collectables:
               Coverage Available and Loss Case Studies

Daniel Wood
                                                     October 26th 2012
Managing Director J. Safra Brokerage Limited

Contents

• The Fine Art Insurance Market
• Coverage Overview
• Loss Examples
   –   Theft
   –   Damage
   –   Fire
   –   Unusual cases
• Choosing an Insurance Partner
• J. Safra Brokerage

The Fine Art Insurance Market

• There is no shortage of choice when looking for an insurer:

    – Domestic carriers
    – International insurers locally licensed
    – Lloyd’s Of London

• No shortage of intermediaries willing to help:

    – Multinational brokers
    – Local specialist brokers

Coverage Overview

•   ARPLOD - All risks of physical loss or damage (including natural catastrophe)
•   Fine Art = any type of collectable: paintings, porcelain, gold, silver, plate, guns, wine,
    antiquities, books, musical instruments, valuable papers, stamps, memorabilia, coin
    collections
•   Also classic cars, motorcycles, aircraft and other vehicles
•   Large collections tend to be fully inventoried with a schedule given to insurers
•   Basis of cover is agreed value
•   Depreciation cover (ex vehicles)
•   Acquisitions
•   Transits
•   Unnamed locations

•   Private Collectors (usually no deductible)
•   Museums (usually no deductible)
•   Fine Art Dealers (deductible tba)
•   Auction Houses (deductible tba)

•   Defective Title cover also available (purchased separately)

Loss Examples

•   Theft – Museums and Private Residences
•   Malicious and Accidental Damage
•   Fire – Art Storage Locations & Private Residences
•   Unusual Cases

Theft

• Nothing grabs a headline like a fine art heist
• Ever increasing values of art and public access to museums make artworks
  an easy target
• The downside of a collection being on public display is that thieves have
  plenty of access to plan a theft
• Disproportionately easy to steal relative to value
• BUT……how does a thief realise value from the theft?
• A good thief does not necessarily make a competent art handler!
• Recovery efforts coordinated by insurers
• Chances of recovery increase with the value of the pieces
• Impossible to sell on the open market
• Only option is to demand cash from the owner for the safe return of the
  pieces
• Right rather than obligation to repurchase at the lesser of settled loss plus
  expenses or current market value

Museum Theft – Rotterdam 2012

•   Kunsthal Gallery, Rotterdam October 2012
•   Seven works stolen in a 3am heist
•   Picasso, Matisse, Monet, Gauguin & Freud
•   State of the art electronic security……
•   Inside assistance?
•   Possibly Lloyd’s of London loss

Museum Theft – Paris 2005

•   Musée d'Art Moderne de la Ville de Paris
•   The Paris gallery's multi-million pound alarm system was broken, "dozing" guards
    failed to spot the raider on TV screens, and outside CCTV only covered the roof.
•   Intruder was able to slip into the museum after removing a window at 3.45am
•   Spent just 15 minutes inside, before cutting works by Picasso, Matisse, Braque,
    Modigliani and Leger out of their frames and slipping away.
•   Uninsured?

Private Residence Theft – Scotland 2003

•   Drumlanrig Castle, Scotland August 2003 – Da Vinci’s Madonna of the Yarnwinder
•   Thieves joined a tour party, waited until it moved on, then overpowered the woman member of
    staff who was there to guard the painting
•   An alarm was set off but the raiders jumped into a waiting car. They are said to have thrown
    away the frame just beyond the castle perimeter. Minutes later, it's claimed they changed vehicles
    and vanished
•   Painting recovered in Glasgow lawyers office in 2007
•   Lloyd’s loss, the appointed adjuster played a key role in the recovery
•   Duke of Buccleugh passed away prior recovery – painting now on display in the National Gallery
    of Scotland

Private Residence Theft – Madrid 2001

•   20 pieces stolen from the home of Ester Koplowitz including Francisco De Goya’s The Swing
•   The raiders attacked a private security officer who was guarding her apartment block
•   He was beaten, tied up, blindfolded and gagged while the robbers entered the apartment
•   Police said three robbers entered the building while a fourth waited with a vehicle
•   Paintings recovered just under 12 months later through an undercover sting operation
•   An undercover Spanish police officer posed as an art dealer and lured the suspects to a Madrid
    hotel under the presence of buying a painting by Dutch master Pieter Brueghel
•   A further nine works of art were found in the boot of a nearby car, among them "The Swing" and
    "The Donkeys Fall" by Goya, Tsuguharu Foujita's "Child with Hat", Camille Pissarro's "Landscape
    at Eragny" and "The Temptations of St. Antonio" by Pieter Brueghel
•   The suspects had planned to show them to the undercover agent after the first sale was
    completed
•   Police said the two men arrested, Juan Manuel Candela and Angel Suarez, were members of a
    well-known gang of bank robbers
•   A third man, Luis Miguel del Mazo, who worked as a security guard at Koplowitz's residence,
    turned himself in to police after the arrests
•   Post recovery, works required some restoration however owner exercised policy right to
    repurchase
•   A Lloyd’s loss

Malicious Damage – Tate Modern 2012

•   Astonished witnesses saw the culprit, described as a man in his late 20s, calmly walk
    up to Black On Maroon (1958) and scrawl a graffiti message in black marker pen or
    paint.
•   “Questions will be asked about security at the gallery, where the Rothko's are not
    protected by glass and are separated from visitors only be a low-level barrier that can
    easily be stepped over.”
•   Uninsured

Accidental Damage

•   Le Rêve - 1932 oil painting by Pablo Picasso, then 50 years old, portraying his 22-
    year-old mistress Marie-Thérèse Walter.
•   Purchased by Steve Wynn in 2001
•   Elbow through the painting in 2006 (tunnel vision)
•   Deal struck to sell the painting for USD 139m just before damage
•   Restoration costs USD 90,000
•   Depreciation? Client claimed USD 54m
•   Lloyd’s loss

•   Also, accidental damage in transit is one of the most common types of loss

Fire – Art Storage Location

•   MOMART warehouse East London 2004
•   Fire started in an adjacent unit where thieves had entered the premises
•   Issues of liability and subrogation – upon whose policy does the loss fall?
•   Many items owned by Charles Saatchi
•   Hirst, Emins and others all destroyed
•   Lloyd’s, the London market and international insurers affected
•   Subsequent greater focus upon risk accumulations
•   Geneva Freeport values

Fire – Private Residence

•   Gstaad chalet fire 1/1/11
•   ‘The fire brigade was called and the flames were brought under control fairly
    quickly’ - at least everyone thought they were
•   ‘But then, two hours later, it all started up again. A neighbouring fire brigade was
    called in this time as well, but the extra help came too late and the chalet was
    completely destroyed.'
•   Loss adjuster on site within 24 hours
•   Some pieces deemed a total loss, others smoke damaged – repair and depreciation
•   Lloyd’ s and London market loss

Unusual Losses

•   City of Cologne – archive building
     – March 2009, part of the building collapses
     – Underground railway to blame?
     – Huge number of archive documents lost
     – Uninsured?

•   Pigeon in private residence
     – Spent the weekend enjoying the lounge
     – Furniture, antiques, paintings and rugs all damaged
     – Lloyd’s

•   Monkey
     – Entered an art dealer’s premises in India
     – Caused significant damage to a number of pieces
     – Lloyd’s

Choosing an Insurance Partner

•   Quality and knowledge of the broker
•   Service standards offered by the broker
•   Strength of chosen carriers paper
•   Carriers knowledge of fine art
•   Breadth and depth of the fine art product offered
•   Loss adjusters – who is approved to work for the carrier
•   Other value added services offered by the broker or carrier

J. Safra Brokerage Limited

• Idea conceived by Mr JS
• Founding partner has looked after the interests of the family for many years
• An insurance broking business focussed on Fine Art but also able to offer
  property, yachts, aircraft, kidnap and ransom
• Acts as an underwriter through “in-house” authority from Lloyd’s to insure
  any one location limits of USD 400m – the largest of its kind
• In-house claims settling ability
• Able to access over USD 1bn capacity in Lloyd’s plus arrangements in place
  with many other London and worldwide markets
• Also able to look after any other insurance needs through joint venture
  partner and trusted third parties

• Discreet 24/7 service – a family office culture