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


Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”


“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.


“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?


“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.