In the morning of the second day I attended the session on valuation and insurance, which comprised of three presentations.

1/ Firstly, David Bellingham of the Sotheby’s Institute of Art explained that auction houses value works of art for sales estimates, prior to an auction, and also for insurance purposes and defined the primary and secondary market for artists. Every appraisal is unique and inextricably linked to:

– external factors, such as supply & demand, current taste, art market trends, state of the economy, recent prices by a similar artist or, of similar works of art, and
– internal factors, such as the cultural value attributed to the artist (the artist’s brand), date of the work, the subject, the medium and scale, authenticity, provenance, its exhibition and
literature history and finally, an x-factor such as rarity.

Using the sculpture Equivalent VIII 1966 by Carl Andre in the Tate’s collection (the infamous bricks) as an example


he gave us an insight into auction house appraisals. Based on calculations of the original price paid for this work by the Tate, the iconic status of the work due to the media exposure it has had, the artist’s validation by a museum and the highest prices achieved by Carl Andre at previous auctions, the price for this work would be between £1.5 – £2 million, if it were to come up for sale in 2014. The insurance value for the work, Mr. Bellingham asserted, would then have to be between £2 – £3 million, a value that is between the high sale estimate and twice the low estimate. It was interesting to hear an insurer from the audience contesting the validity of this assertion and claiming that there should be no difference between sale price and insurance value for a work of art. If the value of this piece was £2.5 million today, the insurance premium would be about £8,750 which is about 0.35% for a private collection; it is important to mention that insurers offer much lower premiums to public institutions.

2/ Lora Houssaye from Centre Pompidou and Aurore Basly from the Louvre then discussed the benefits of non-insurance and how it works in France and in other jurisdictions. National Museums in France normally bear their own risk for their own collections and for when they lend to each other and to regional museums while the objects are in transit to and on display, more like the UK indemnity system. Non-insurance is either granted automatically or by contract by the Ministry of Culture to National Museums, outsourced storage warehouses, for long loans, for transits in-between museums within the Paris area, or between museums and storage venues. Transport must be couriered. The borrower pays the cost of damage and the lender bears the cost of total loss, although they admitted that things get more complex when depreciation as a result of damage has to be calculated. This system offers huge savings, while museums are still able to insure a specific high risk, if deemed necessary and the premium allows it.

The two French speakers also outlined the benefits of a shared liability system, e.g. facilitation of partnerships, long loans and reciprocal loans. It is important that for this system to work well, it has to be agreed by the governing bodies of both institutions with a contract clearly setting out each party’s responsibilities.
The presentation finished with the recommendations that lenders provide reasonable valuations, they accept government indemnity schemes and agree to share in an equitable manner the coverage of touring exhibitions as a way of reducing costs. In addition, it was news to me that the indemnities of Bulgaria and Norway also cover loans while abroad at no cost to the borrower!

3/ Last but not least, the temperature rose in the room when Stephan Zilkens, Swiss fine art insurance broker of the company with the same name who had given almost the same presentation at the ERC in Wolfsburg ten years ago, listed all the pitfalls of government indemnity, without an opportunity for real debate. After a brief introduction to when different countries introduced indemnity schemes (Sweden was first in 1974) and the diversity of these schemes across Europe and the US, he listed the following reasons why commercial insurance is better:

– Governments do not have the huge reserves required to underwrite the risks covered by indemnity schemes
– Indemnity relies on risk management conducted by people that are no experts in managing insurance risks and in handling of claims
– Covering touring exhibitions with a combination of indemnity and insurance policies can be problematic
– The warranties of the state indemnity schemes are often vague with regard to packing, transportation, depreciation, etc with the exception of the US scheme
– Heavy burden for the taxpayer if the worst case happens (earthquake; terrorist attack)
– Private lenders often do not accept indemnity
– State indemnity schemes often have no clear definition regarding risk reducing measures (isn’t this what registrars are trained to do?!)

Mr Zilkens claimed that insurance premium rates have gone down by 80% for bigger exhibitions since 1975 and asked why the national budget should be burdened with 200,000,000€ risk when insurance is available for around 100,000€. That’s fine if you have 100,000€ to spend!

He also presented us with statistics on claims frequency from museums, galleries and private collectors, causes of loss in % of frequency and % of paid claims. These statistics were based on his company’s own research (as industry ones are not available), which he claimed are approved by leading institutions and did not include the period over which they were gathered.
His presentation is available here:

It was left to Jane Knowles, Chair of UKRG, to stand up and invite an open discussion of how indemnities work and their benefits as a serious way forward for reducing exhibition costs and managing risk to cultural property.

Nickos Gogolos
Registrar, Victoria & Albert Museum