how to protect your art from flooding and extreme weather events

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As the world increasingly begins to see the effects of climate change, artworks that were once considered safe are now at risk of being lost forever, a problem for collectors faced with soaring premiums and unattainable insurance policies.

A recent example of the impact of climate change on the insurance market was seen in the US in 2017, where the insurance industry lost more than $300 billion due to a series of hurricanes that hit the Gulf Coast.

Flash floods, heat waves and forest fires have dominated the headlines around the world in recent years. As a result of these alarming weather patterns, the art world is increasingly turning its attention to how art and artwork (high value, wearable items) need to be handled, transported, displayed and stored.

analyze risk

Around the world, insurance analysts research climate change data to assess potential hazards, mitigate risk, and communicate likely outcomes to collectors. While most insurers offer “all-risk” policies for works of art, as climate change worsens, it will become common for higher-risk locations, such as earthquake or flood areas, to include a higher premium (possibly even a specific exclusion) for them any work of art preserved at this location.

turning point

There is no doubt that the fine art insurance market is at an inflection point as the future raises questions more uncertain than ever. For example, can art galleries still be justified in expanding flood plains like Miami or Venice?

Now is the time to discuss significant building upgrades, alternative storage options, or perhaps a complete relocation for these well-known art destinations. Such a prospect may seem unfathomable to many. But also the climate crisis we are facing and the art market could be forced to adapt in unprecedented ways to the challenges ahead.

For now, collectors are fortunate that weather warnings usually provide sufficient notification to safely remove their art collection from the affected area, although some emergencies (especially wildfires) progress quickly and make salvage impossible.

To protect works of art, most insurers and brokers offer services to monitor the weather and notify policyholders when their collection may be at risk.

warehouses

The increasing risk is so great that increasingly safe deposits are becoming the focus of collectors. Only this time the enemy is climatic, and not criminal.

When art collectors cannot obtain insurance, additional precautions should be taken to protect the art. For example, art collectors residing in areas considered high-risk should store their art in a weatherproof location to avoid the art becoming damaged and depreciating in value as a result of such damage. In such situations, underground vaults should be considered, especially when insurers refuse to compensate artworks in regions deemed high-risk.

Which regions are considered the most dangerous? In the US, California is the state most prone to natural disasters. Seven of the ten most vulnerable US cities are in this state. Meanwhile, Greece is one of the most seismically active countries in the world and is also experiencing severe forest fires, as seen last August. Climate change therefore poses a significant threat to the country’s wealth of ancient architecture and artifacts.

New insurance options

Insurers have long been concerned about the impact of climate change on the catastrophe models used to price premiums. An alternative insurance option could be parametric insurance.

While still based on similar catastrophe models, parametric insurance offers a predetermined payout upon the occurrence of a specific trigger event. For example, if the trigger was an earthquake greater than four on the Richter scale, parametric insurance would automatically pay out if an earthquake of that magnitude occurred.

These guidelines can streamline the process and make losses more predictable. However, when it comes to parametric fine art insurance, it must be remembered that insuring art is not the same as insuring something that is replaceable – a work of art once lost is lost forever.

  • Catrin Povey is an insurance attorney in Capital Law’s Financial Services and Insurance team.
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