Fine Arts Risk

7 Critical Risks Facing Museums in the Fine Arts Industry

Fire and flood are some of a museum’s worries. Theft, loan gaps and vandalism top the list.
By: | July 9, 2018 • 5 min read

Preserving art, culture and history is a costly enterprise as many museum owners know. Even if an exhibit doesn’t boast a Rembrandt or Abraham Lincoln’s hat, it can still cost a pretty penny to keep the art and sculptures safe and insured.


There are a number of growing challenges museums and other galleries have to be on top of if they want to protect their collections from the obvious risks — flood and fire — as well as less-thought-of but equally important risks — loan gaps and transit.

1) Flood

Water damage can be a scary thing, especially for museums. Books, paintings, sketches, portraits and photographs — these products are extremely susceptible to water damage.

In 2017, Hurricane Harvey unleashed 50 inches of rain on unsuspecting Houston, leaving behind an estimated $75 billion in total damages thanks to flood waters. In addition to homes and businesses, Houston’s Theater District took a big hit. The Wharton County Historical Museum and 20th Century Technology Museum were nearly covered in muddy flood waters.

Mark Schulze, technical director of the 20th Century Technology Museum, told the LA Times, “Wharton County (who owns the museum building) says it will not pay for repairs to make the building habitable again, and conventional occupancy insurance almost never covers flood damage. Preliminary estimates for full remediation of the existing building are on par or exceed the cost of building an entirely new building.”

2) Vandalism

The Little Mermaid — Copenhagen, Denmark

It does not have to be a club-wielding, art-hating thug who takes down an invaluable work of art. Vandals come in all shapes and sizes, from protesters to disgruntled museum-goers, teenagers to those who think they’re being funny.

Paint, rocks, acid, knives and even lipstick have been known to cause damage to paintings and sculptures. Outdoor sculptures tend to take the brunt of defacement and cruelty as well.

One example, ‘The Little Mermaid,’ nestled on the beaches of Copenhagen, has been victim to not one, but two beheadings in the last 50 years. The first occurred in the mid-1960s as part of a political protest. The original head, which was sawed clean off, has never been found. The replacement head was decapitated in the 1990s, and though the culprits were never caught, they returned the mermaid’s head a month later anonymously.

3) Theft

An estimated 90 percent of all art theft involves inside personnel at the museum. Nearly $752.5 million worth of art was stolen in the U.S. in a five-year span. Forty percent of all art theft takes place in the UK, while 19 percent of theft occurs in the U.S.

The most vulnerable collections are stolen directly from private homes, making up 52 percent of all thefts. Only 10 percent of art theft occurs at art galleries and other similar facilities, like museums.

Though that’s a small percentage, museums should not skimp on their anti-theft security or insurance. Cultural property theft is the fourth largest crime category worldwide; it adds up to $3 billion to $5 billion each year.

4) Gaps in loan agreements

Museums and galleries often display artwork loaned out to them by private collectors or other museums. Sometimes, museums may sign an incoming loan agreement that asks them to take on more liability than their insurance policy covers, leading to gaps. If something were to happen, museums would be on the hook for damages.

Increasing temporary policy limits is one solution, though the trouble comes in when a museum’s curator doesn’t know there is a gap to begin with. Reviewing all insurance policies during any loan period is a priority when it comes to displaying a special exhibit.

5) Accumulation of values

It’s risky for museums to keep all their valuables in one location. If they split up their expensive artifacts and paintings, museums are spreading their risk and thinking proactively about preservation. That way, if one building or one hall suffers an incident, not all of the art is in the path of risk.

But many museums have massive values all in one building or even in one single gallery, which opens them to massive losses if something were to occur.

6) Fire

There’s no question that the items held in museums are vulnerable to burning. Even items held in fire proof cases are susceptible to smoke and ash damage. Art can’t be replaced, and restoration can be costly.

With volatile wildfire seasons growing and extending each year, museums need to keep an eye on both internal and external causes of fire risk.

Museums are starting to invest in other methods of fire-proofing outside installing smoke detectors and sprinklers inside the building. Getty Center in Los Angeles is a great example. It is a fortress of art, with travertine stone walls, a crushed stone roof and irrigation pipes used to saturate the earth in case of a fire outbreak.

7) Transit

Art is a privilege, not a right.

Museums and private art collectors generously loan out their Picasso’s, Van Gogh’s and Monet’s, because these precious pieces of art connect us to the history of the human race. These million-dollar pieces are sent back and forth all over the world just to be put on display.


But by allowing other galleries and museums to display the artwork they’ve purchased and kept safe, art collectors open up their possessions to the horrors of transportation risk.

Theft, accidents and weather top the list of transit issues, not to mention poorly packaged art bumping around in the back of a trailer or cargo plane. Those moving the precious material may not be adept in handling such goods, and human error can lead to some pretty catastrophic losses. Plus, the art needs to be warehoused in certain cases, and finding a storage unit that’s temperature controlled is imperative.

During transit, it is vital that careful evaluation, packing, shipping and documentation be used to prevent damage and loss. This is, by far, the riskiest activity art can undergo, so keeping track of every step of the process can help mitigate potential loss. &

Additional risks submitted by seven-time Power Broker® winner Mary Pontillo, national fine arts practice leader, SVP, Dewitt Stern — a Risk Strategies Company.

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.


In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.


Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”


How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.


One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]