Sunday, October 17, 2010

"The smoke and the risk"

Art insurance in the aftermath of the terrorist attack on the World Trade Center
By David D’Arcy

NEW YORK. Just days after the attacks, AXA Nordstern Art Insurance, the world's largest art insurer, estimated art losses from the World Trade Center attacks at more than $100 million. In preparation for the largest volume of art claims relating to a single event, the firm had already put aside some $20 million. "But this is in the towers only," said president and ceo Dietrich von Frank, "the question is how much art might be in other buildings or affected by the clean up".

Dr von Frank would not name his firm's clients in the World Trade Center, yet he did indicate that AXA was not the insurer of such collections as Salomon Smith Barney, Morgan Stanley, or Goldman Sachs.

The buildings had not been considered at high risk, even though 11 September was not the first attack on the structures.

After the bombing of the buildings in 1993, the administration of Mayor Rudolph Giuliani reduced crime in the city significantly. "The city was a safer place. We didn't have second thoughts about covering works of art in the World Trade Center," Dr von Frank said.

One of AXA's principal clients in the buildings was the brokerage house, Cantor Fitzgerald, whose offices contained 300 Rodin sculptures, among other works. The late Gerald Cantor and his wife had donated recent casts of Rodin works to many museums in the US.

In Europe many insurance companies will not cover losses that result from acts of terrorism.

In the US, where terrorism is infrequent enough not to be exempted in policies, acts of land war are not covered, and some firms have sought to interpret the attacks on the World Trade Center as acts of war to limit their own liability.

AXA would not be looking for any of those loopholes, Dr von Frank said: "I don't think anybody in their right mind would exclude these kinds of terrorist activities. It is covered."

Many art insurance policies have a "25% acquisition" clause, which presumes that art collections are fluid, and insures works of art from the time of purchase, from which the buyer has up to 90 or 120 days to notify the insurer.

The policies presuppose that a certain percentage of works in an active collection might be newly acquired, and insured automatically. That provision seems strangely generous and trusting, but in a competitive art insurance market, insurers who wanted business from influential collectors offered those clients many things.

Policies that cover entire collections provide insurance for objects that might be moved back and forth or, in the case of corporate collections, between offices. "You do not necessarily know all the time where the work of art is," said Dr von Frank.

A major corporate collector like Deutsche Bank (not an AXA client) may well have moved art from its offices near MoMA to its offices in the World Trade Center.

Dr von Frank expects art insurance costs to rise as a result of the losses suffered in the attacks, but he doubts whether those costs would deter either individuals or corporations from collecting. Museums might find those new costs burdensome, he said.
While works of art are damaged by fire and can be stolen, the real threat to these objects—and the strongest reason to insure them—is transport, which has become a fact of life for a growing number of museums that depend on temporary exhibitions for visitors and revenue. Those exhibitions could end up lacking certain loans, Dr von Frank said, not because of rising insurance costs, but because collectors have lingering fears associated with the attacks.

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