Spring 2014 Bermuda Re/insurance+ILS
Fine art - Hiscox
Robert Korzinek Hiscox
Fine art insurance is a line with deep roots in the Lloyd’s market
and at Hiscox in particular. Robert Hiscox’s personal interest in art was integral to the creation of what is now a vibrant fine art market at Lloyd’s, one in which Hiscox is a recognised lead. The line is a “flagship” product at Hiscox, said Korzinek, with the company deeply involved in supporting the arts. “We collect art, sponsor artists and exhibitions, and are involved in its promotion—our interest stretches well beyond just our insurance activities and has become an integral part of our corporate identity”, said Korzinek.
Lloyd’s remains the undisputed home for fine art coverage, representing
40 percent of global premium, even as the dynamics of the international art market evolve. “While we have vibrant and growing fine art insurance activity within the group, Lloyd’s is still the place to be, because there is substantial fine art premium and expertise at Lloyd’s”.
Korzinek said that two characteristics of Lloyd’s set it apart as the
market of choice for fine art coverage: capacity and speed of response. Lloyd’s represents the “biggest pot of fine art capacity available anywhere,” with capacity that is flexible in nature and able to fulfil the needs of large, bespoke risks. “In the age where a substantial travelling exhibition might have an insured value of $1-2 billion, it is important to have a market that can offer quick, flexible and substantial capacity”. Lloyd’s is able to do exactly that.
Korzinek said that the fine art market had seen an explosion in prices
in recent years—a four-fold increase in values since 2006—and a shifting geographic focus towards territories such as China and Brazil. But he said that being one of the “last opaque and unregulated markets” the value of concentrated market understanding is significant. “This is a fractured, multi-billion dollar market in which soft knowledge and an understanding of the geography of the market are all-important”. This is exactly what Hiscox brings to bear through the Lloyd’s market.
“Our interest stretches well beyond just our insurance activities and has become an integral part of our corporate identity.”
This expertise is all the more pressing in a world of $100 million or
$200 million works of art, said Korzinek, one where values continue to rise. He said that valuations such as that of Francis Bacon’s triptych of Lucian Freud, which sold for an auction record of $142 million at Christie’s in New York in November, had encouraged a re-evaluation of values among collectors with similar works. Such sales continue to encourage the upward development of fine art values and Korzinek said that Hiscox encourages clients to re-appraise values at least every three years in what is a decidedly bullish art market.
Korzinek said that while market premium has grown substantially
in recent years so too has competition. “Art has been viewed as an attractive risk code for new markets to enter, because they look at the historic performance of art insurance and reinsurance”. He cautioned however that past rate performance does not reflect the volatility or increased rate pressure evident in the current market. “He warned that while new entrants may be able to undercut prices on dealers, auctioneers and large exhibitions —the market’s most visible business—they represent a small and less stable part of a wider market in which private collectors predominate. Korzinek said that access to private collectors requires the kind of deep roots Hiscox has established within the art world, delivering greater pricing stability to the more well-established players.
Borja Laria / Shutterstock.com
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