A London warehouse fire in 2004 leading to losses of about $100 million in irreplaceable works of art spurred new risk management efforts, resulting in best practice standards for art storage facilities, according to an art insurance expert.

Because of its exposure in covering fine arts collections, AXA Art Insurance Corp. took action by hiring a firm to develop the Global Risk Assessment Platform, or GRASP–a Web-based system to create and manage a risk assessment method of evaluating warehouse facilities.

GRASP is now part of AXA Art's worldwide risk management initiative, named “artprotect.”

“We see a lot of horror stories,” according to Christiane Fischer, president and chief executive officer of AXA Art in New York. “We were shocked by what we saw in some cases.”

For example, she said, more than 50 percent of the art warehouses checked did not do employee background checks when hiring guards and others working with the pieces–something easy to remedy without a lot of cost.

This glaring weakness became obvious a few years ago with the theft of several Milton Avery paintings from a truck transporting the works of art from Florida to New York.

“We ultimately recovered them,” Ms. Fischer noted, “but it turned out that the so-called 'fine art' shipper picked up the paintings at the museum in the right truck, and then the paintings were put into a different truck–a rental truck.”

The rental truck with the paintings then disappeared, she said. Once the art was recovered, it was found that the truck driver, hired by the storage company, had 31 criminal indictments and did not possess a driver's license.

“We found that people assume too much,” she said. “They need to ask questions.” She noted that anyone can put up a sign advertising fine-arts shipping–specific training and education are not required.

Another security precaution not being taken, the company discovered, was key controls to identify which employee has entered a particular storage vault.

As for fire prevention, many warehouses “had a fire drill handbook, but it had never been tested,” according to Ms. Fischer. “Good housekeeping things–every school has fire drills, you would think a warehouse with hundreds of millions and even billions of dollars in art would do the same thing.”

AXA, she said, recognized its critical exposure in this area and the need to put good risk management in place.

The company's exposure is not because it insures the warehouses, she said, but because its clients choose a warehouse to store their works.

“In the past, nothing really ever has been done, except maybe a quick inspection, or we would go by the reputation of the warehouse,” she noted.

Today, warehouses are inspected, which is ultimately a service to collectors, who can make better choices when it comes to choosing a facility, she said.

Warehouses are rated in different categories of facility management, she explained. They must answer more than 1,000 questions, which an on-site assessor distills into a matrix that profiles the processes and functions of each facility.

“If the score is a certain percentage, it comes as a green light,” she said. “In another percentage it's an orange light or a red light.” A list of recommended warehouses has been made available on AXA's Web site as of this spring.

Since the start of this program in 2007, AXA said there have been more than 45 surveys of art storage locations in the United States, with more taking place in Europe, South America and Asia.

AXA noted that the majority of art storage companies have responded positively to this program. Most have begun to implement changes to meet the standards needed to protect increasingly valuable art.

Many of the changes are procedural, whereas some require capital expenditure, AXA said in an e-mail.

Education on warehouse issues has been a long process, according to Ms. Fischer, because the company must educate collectors. It also produces a newsletter that is sent to collectors.

“Response has been predominately positive,” Ms. Fischer noted.

Special Reports /

Art Losses Prompt Carrier To Establish System To Assess Warehouse Exposures

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