From responding to extreme weather conditions and preventingtheft to exploring new ways of growing attendance and revenuenumbers, museums face a daunting list of challenges in thisstagnant economy.

Accordingly, and often at the suggestion of their insurancebrokers and carriers, cultural institutions of all sizes areadopting comprehensive risk-management and loss-prevention programsto address liabilities ahead of time.

Natural disasters and extreme weather made 2011 second only to2005 as the most costly year ever as measured by insured losses,according to the Aon Benfield division of the brokerage Aon Corp.And cultural institutions were certainly not spared the damage fromlast year's wild weather—both to their buildings as well as totheir grounds, which are often an equally important visitorattraction.

An early snowstorm on the East Coast, for instance, damaged orfelled hundreds of thousands of trees last October, hitting the NewYork Botanical Garden in the Bronx particularly hard. For theGarden and similar organizations, observes Maureen Waterbury,cultural-institutions market-segment manager at Chubb CommercialInsurance, “weather is their key exposure—and it can significantlyimpact them.” These entities, she adds, should consider addingspecial coverage for trees, shrubs and landscaping.

Extreme weather can also increase the probability of routineclaims, adds Shirl Hedges, an underwriting manager at PhiladelphiaInsurance Cos., who counts cultural organizations among herspecialties. Snowplows often shift stanchions and other objects inautomobile parking lots, she explains, exposing rebar and othersuch trip-and-fall hazards, while rainstorms create slipperyconditions on marble staircases and in lobbies.

Philadelphia Insurance and other carriers arehandling the rise in extreme weather events by conducting morefrequent site inspections and testing insureds' emergency-responseprocedures. For the moment, as long as carriers remain satisfiedthat museums are properly addressing risks, pricing is stable andcoverage remains available.

Hedges, for instance, felt comfortable underwriting a waterfrontmuseum in Florida because it had installed windows rated towithstand 150-mile-per-hour winds. But if the rash of so-called“100-year storms” persists in certain regions, she says, it's onlya matter of time before carriers are forced to re-evaluate theirofferings.

Extreme weather opens the door for other potential losses asidefrom property damage. Thieves, for instance, can take advantage ofthe distraction these events create. Pilferage and “mysteriousdisappearances” remain a top loss area for museums, says AnthonyRoman, CEO of the security- and risk-management consultancy Romanand Associates, but it can be difficult to prove theft whencultural institutions lack adequate inventory-control systems.

And those institutions that do have inventory systems areincreasingly at risk of cyber-hacking. While the theft of creditcard numbers and other personal data dominates the cyber-insurancediscussion, Roman says, both insurers and museums routinelyoverlook the risks posed by criminals who hack into databases toadjust inventory records and artifact valuations—making pilferageand undetectable theft more easy—or to learn details about amuseum's plans for transporting works of art in order to interceptand steal them.

While most carriers' General Liability policies provide for somecoverage against data breaches, Waterbury recommends buying astand-alone Cyber policy with separate limits to address theseadditional, unique exposures.

Roman, for his part, recommends that museums adopt an enterpriserisk-management program that comprehensively addresses everythingfrom catastrophe pre-planning and management to theft, and evenpotential new-business opportunities that can generate new risks.This approach brings risk-management experts from all facets of aninstitution together to craft a unified strategy for advancingrevenue goals, while also mitigating the potential for financiallosses.