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For auction house liability insurance, two words describe the current state of the market: stability and moderation.
While there have been price increases, the auction house insurance market has not seen the volatility that other sectors have experienced in recent years, despite the unique risk and liability challenges that auction house insurance buyers face, experts say.
“You always have some companies trying to beat each other out with rates and coverages, so it’s a typical insurance marketplace,” said William G. Fleischer, principal at Bernard Fleischer & Sons Inc., a New York-based brokerage with a focus on art insurance and a client base that includes auction houses, artists and collectors.
Rates for auction houses have not seen the sustained hardening of rates that other insurance lines have seen since 2018.
“It’s not like all of a sudden five years ago to now there’s a 30% increase,” Mr. Fleischer said. “It’s always been staying competitive. … Some increases have been flat, and some have been small and in the single digits. It’s pretty stable.”
Robert Read, Hiscox’s head of fine art and private client business in London, said the market is less volatile than some others.
“You’re insuring generally wealthy people and their objects they buy for personal pleasure,” he said. “It’s less of a hostile market, than, say, if you’re providing legal advice or you’re an accountant providing advice … where the effects of what might go wrong are so much greater.”
But the professional liability provisions in the coverage are leading to some increases, following trends in the wider market, he said.
“It’s fairly stable on all the elements apart from the professional liability side, which has been under the most focus lately and where rates have probably risen more,” Mr. Read said. “You’re seeing a bit of a hard backside, but it’s not as dramatic as in other areas.”
Insurance pricing for auction houses varies depending on package specifics, such as details about insuring the risk of physical loss or damage for items in an auction house’s custody or control. Buildings and business interruption coverage may have more stable prices, for example, but specific professional liability cover can be higher.
The global arts market hit $65.1 billion in 2021, according to Art Market 2022, a report by Arts Economics founder Clare McAndrew and published by Art Basel/UBS.
Auction house liability cover may be a small market, but it carries with it unique issues.
Risk elements that are specific to auction liability include provenance and authenticity.
Provenance refers to proof of title to sell a given item, without any disruptions in the ownership chain. Authenticity refers to auction houses’ descriptions of the items they sell.
“One of the exciting things about the art market is that people buy and sell on really minimal amounts of information. It’s so heavily unregulated, plus you’re dealing with mobile assets that can be stolen,” Mr. Read said.
Auction houses carry unique coverage needs to address the risks they face, Mr. Fleischer said.
Coverage must address risks, including theft, breakage, water damage, vandalism and malicious mischief. Potential damage from fire or flood is also a necessary element, depending on where the art objects are warehoused before sale, he said.
“There were incidents where someone received a piece of jewelry wrapped in a wrapper, and one of the people in the office thought it was garbage and threw it in the garbage,” Mr. Fleischer said.
Employee theft is often excluded from policies.
“That’s a big problem when you think you’re insuring your artwork and all of a sudden it mysteriously disappears,” Fleischer said. “The auction house is going to have to come up and pay for that because it is not on their policies.”
Online auction houses have other liability concerns, depending on the object up for sale and how the process is handled.
“I get phone calls constantly regarding online auction (houses). Some of them actually have the work in their possession and some of them don’t,” Mr. Fleischer said, which leads to variable coverage needs depending on the location of the object and how it must be shipped.