Fine Arts - Insuring To Value

Today's collectors are purchasing fine art not only for its cultural value, but they are using their fine art purchases as an asset. The heightened appreciation for art as an investment is driven largely by rising prices at auctions, particularly for contemporary art. When compared to the S&P 500 index for 5 year returns the Mei/Moses Fine Art Index outperforms with 11.3% on returns vs 2.5% returns for the S&P 500.

As shown, rates of return on art as an asset are in part being driven by the extraordinary speed the art market is moving.

Art market sales we have seen in recent years that illustrate this trend are:

• Over $115 million in 2005 US live auction wine sales (not including charity & online auctions)
• In 2005 fine art auction sales exceeded $4 billion
• $626 per ounce for gold
• $1,238 per ounce for platinum
• $27.4 million worth of fine art sold at the 2006 Coeur d'Alene Art auction
• $20.3 million for Ellen Barkin's 100 piece jewelry collection auction at Christie's

These record prices underscore the importance of getting updated appraisals to accurately reflect the current market value of your fine collectibles. The havoc that is being caused by these increases in the value of fine art is generating a serious problem for proper insurance-to-value for fine collectibles.

The worst possible scenario is to experience a loss on a fine collectible that turns out to have gone up in value significantly, but the increase in value was never specified on the policy. Collectors that are not re-appraising, in today's market, are gambling with their settlement should a covered loss occur. Whether a fine collectible suffers damage such as a water stain at 40% of the value or a small tear at 60% of the value, proper insurance-to-value is critical.