Expert: Most Art Collections Underinsured

Mr. Dupplin, who spoke at a conference, "Art: An Alternative Asset Class," in New York yesterday, told National Underwriter that "roughly speaking, in every survey we've done, in a number of countries except the U.S., about two-thirds of clients underinsure." Of those who are underinsured, he said, at least half are "pretty badly underinsured."

This happens for two reasons, he explained. The first is that "things go up in price. It's quite possible for things to move quite dramatically in value." The second reason, he noted, is that people add on to their collections and "then forget they have done so."

Mr. Dupplin said, however, that it isn't necessary for risk managers to revalue collections every year. "I think what you do need to do is have a good idea about what might be moving very sharply," he noted. The person managing the corporate art collection should be "on the lookout for any movements in value."

He added that "about every three years is what we would recommend to most of our clients." Revaluing every year is "too expensive, too time consuming and not necessary." At the very least, he said, a collection should be revalued every five years.

Mr. Dupplin said that having art and collectables appraised is much more economic than in the past. Most firms now work on a per-hour basis which has lowered costs. They also offer an automatic update service. "Now that they can take digital images, they can very quickly, without revisiting your premises, know what you've got," he said.

But as important as valuing artwork and collections is, many collectors do not have their work appraised. He said Hiscox has about 150,000 clients, 10,000 of which are serious collectors.

"Quite a lot of those are deeply private people who don't like appraisers in their building," he said. "So they try and do it a bit themselves. As insurers, he said, "we have a series of pretty good systems" that can help in determining a work's value.

Taking care of a collection should fall under the auspices of the risk manager or insurance buyer, he said. "It would be wrong of the insurance buying manager not to at least consider the art," he noted. "If he decides not to buy [insurance], fine, but he must consider it."

Mr. Dupplin's advice to insurance buyers of collections is to work with a specialist. "It's a strange type of insurance," he said. "With most insurance you are just buying a financial promise?any insurer knows how to mend a lavatory or rebuild a building. But with art insurance you are buying expertise," he said.

He noted that "you need to feel with your art insurance that you are with a specialist insurer." Otherwise if you have a claim, "you might not have a satisfactory resolution. I would discuss with your broker who your specialist is."

He warned that while there are a number of well-respected art insurers, "there are an awful lot of people who are not specialists."