Fine Art
Deteriorating trading conditions to affect insurance buying patterns
Difficult trading conditions are particularly affecting mid-tier fine art dealers and they are likely to want to look at options to reduce insurance costs for example through a benchmarking exercise. Such initiatives may well be successful, since the London Market is showing increased appetite for this class of business. Insurance buyers may also want to explore opportunities to cut expenses by reducing their policy limits and therefore total sum insured.
Changes in policy terms and conditions
Since the start of the Russia/Ukraine war, the market has widely applied the Five Powers Clause and the Russia, Ukraine and Belarus (RUB) Clause, which is a Territorial Exclusion.
Underwriting changes
Notable people moves in the market include James Alexander who has left Aviva to head up the Fine Art offering at AWAC, and Giles Coghlin who has moved from Aviva to a Senior Underwriting role at Everest
Geographic/sector differences
Wildfire deductibles continue trending higher for California risks easing rates combined with more capacity available in the local market provided by Treadwell. Florida risks can expect higher windstorm deductibles.
New solutions
Various Lloyd’s syndicates are working on their own private collectors and art dealers wordings, potentially creating more options for insurance buyers.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Insurers have traditionally perceived Fine Art as a stable market and for claims free, well managed collections/business we expect flat renewals as standard. We may also take advantage of ‘No Claims Discounts’, ‘Long Term Agreements’ and ‘Profit Commissions’ to reward clients and help manage premium cost.
Expected capacity change in the next 6 months for claims-free portfolios
We expect capacity to remain similar and stable in the absence of major disruption to the market.
Expected coverage change in the next 6 months for claims-free portfolios
We expect coverage to remain the same in the absence of a significant change in the underwriting environment.
The insurance market for Specie & Jewellery is softening and the appetite for general specie lines of business is growing.
Emerging risks
Insurers are concerned about cyber-crime, particularly in relation to art dealers. This is because of their often antiquated IT systems, small work force, and high value trading. This combination makes them a particularly attractive target for cyber criminals.
Renewal recommendations
Make sure you understand the policy coverage (terms and conditions) and ask your broker where there is flexibility in terms of cover and price. If you are an art dealer and you are paying a high price for a transit limit you are not using, ask for alternative options to gauge value for money. It is not advisable to remarket every year because insurers reward loyalty, but it is useful to review options every three years to ensure you continue to receive the most competitive terms and premium. Work with your broker to ensure you are receiving the most competitive solution that suits your requirements.
For further information, please visit the Lockton Specialty page, or contact:
James Ferrer
Head of Fine Art
E. james.ferrer@lockton.com