Eye of the Policyholder: Art Collectors Protect Prized Beauties

Beauty may be in the eye of the beholder, but in the case of high-priced art, it's also often under the watchful eye of an insurer.

The high-profile theft of an Andy Warhol art collection from a West Los Angeles home earlier this month highlights the need for art insurance, experts said.

The collection, which is valued in the millions, was stolen from businessman Richard L. Weisman's home sometime between Sept. 2 and 3, according to the L.A. Police Department.The collection includes 10 pieces, each 40-inch by 10-inch, depicting famous athletes, as well as a portrait of Weisman. The works were produced from 1977 to 1979.

A $1 million reward is being offered for information leading of the recovery of the artwork.

Vivian Ebersman, director, art expertise, at Axa Art, said by far, the most common claim the company sees is accidental damage while the artwork is in transit

"Among our collector constituency... they are very tuned into security and minimizing the possible theft of works of art," Ebersman said.

Indeed, most serious collectors already have a security system in place, said Robert Read, chief art underwriter for Hiscox. "Most people have security not just to protect their possessions, but to protect themselves as well. If you are wealthy, there's a natural self-interest in having proper security," he said.

Both Ebersman and Read said insurers will ask about a homeowner's security before covering an art collection, and offer advice to improve the system if necessary before writing the policy.

Even though art theft is rare, tens of thousands of pieces are stolen every year. Interpol has recently launched an online database of stolen artwork, which currently includes 34,000 pieces, just a fraction of the estimated total.

"The thing about theft is it doesn't give the thief that good a return, especially when the items are well known. It can be quite hard for them to get rid of the works, and there's a small re-sale value," Read said. "Theft is the dumbest form of art crime."

Ebersman said stolen paintings are hard to sell legally, because well-informed collectors are always interested in the painting's history, or provenance. "In the case of outright theft, a painting might be recovered because a potential buyer carries out basic due diligence," she said.

In one case, an art thief offered a painting to a gallery that did a simple search and discovered the painting had been stolen. The police were called, the thief was caught, and the painting was returned, she said.

Putting the stolen painting up for auction would also be difficult because they need proof of title, Ebersman said.

In many instances, insurers offer a reward for stolen artwork that's contingent on the tip leading to the successful prosecution and conviction of the perpetrator. "Otherwise, the reward itself might encourage people to steal to get the reward," Read said.

Premiums for art insurance are based on the value of the collection. Collections located in high-risk catastrophe zones are likely to face a heavier premium. For a larger collection worth more than $10 million, Read said the premium would be a rate of less than 0.2%. "It's pretty modest," Read said.

Depending on location, security measures in place, types of objects, type of collection (commercial, private, institutional), Axa Art said it would charge between $1,000 and $1,500 to insure a $1 million collection; $8,000 to $10,000 to insure a $10 million collection; and $70,000 to $100,000 to insure a $100 million collection.

Read estimated the total market to be about $600 million for stand-alone art insurance, not including policies that are written as part of a homeowners' policy, which is common in the United States.

Art insurance is a highly volatile business, Read said. "$600 million might sound like a lot, but given there are paintings out there worth $100 million, one big loss at a major museum can wipe out your premium," he said.

Billions of dollars of artwork are insured, including dealers, museums, private collectors, corporate collectors, artists and conservators.

While an artwork is damaged in transit, insurance will cover the repairs of the piece, plus any depreciation caused by the damage, said Ebersman.

For an old master painting that has already been through many stages of conservation, a fresh repair might mean minimal depreciation, Ebersman said. However, if it's a pristine contemporary work that has been damaged for the first time, the depreciation can be significant.

Of course, paintings often need restoration as time and gravity take their toll on pigments and canvas.

Last year, Axa sponsored, "Imageless: The Scientific Study and Experimental Treatment of an Ad Reinhardt Black Painting," an exhibition at the Guggenheim Museum. The subject one was of Reinhardt's all-black paintings, which had been damaged. On studying the painting, it was found to have been repainted 20 times, the first 10 times by the artist himself.

"Is it better to have left the original damage or to repair the damage?" Ebersman said. "The project didn't solve the problem, but it gave people something to think about. With works of art, every case is individual. There are no rules. There can be philosophies, but no rules."

In the case of a stolen piece, it's a 100% loss for the insurer, she said. The art work's value is agreed upon ahead of time, and the claim would be based on that amount.

Most art collectors already have art insurance, she said.

"The power of art is very great. You know you are in the presence of something that is larger than you are," Ebersman said.