EBM Insights podcast series is a deep dive into current issues surrounding insurance and risk management in today’s ever-changing world.
In this episode we chat to Tim Stevens, a Fine Art Underwriter from Hiscox, who provides into the special niche of Collectibles.
A transcript of this podcast is below. The complete EBM Insights podcast series is available here.
Introduction:
In this podcast we are talking about Collectibles, most importantly what they are and how to insure them. We are joined by Tim Stevens, a Fine Art Underwriter from Hiscox. Hiscox is an Underwriter at Lloyds of London and largely specialises in niche areas of the market such as Collectibles.
00:00:00 Speaker 1 – Disclaimer
In this podcast, we have provided general advice only and not personal advice. In giving this advice we have not considered your personal circumstances.
00:00:13 Speaker 2 – Sandy (Senior Marketing Specialist, EBM Insurance & Risk)
Welcome to EBM Insights. In this podcast we are talking about Collectibles, most importantly what they are and how to insure.
Joining me all the way from London is Tim Stevens, a Fine Art Underwriter from Hiscox. Hiscox is an Underwriter at Lloyds of London and largely specialises in niche areas of the market, one of which is today’s topic being Collectibles. Thank you for joining me today, Tim.
00:00:37 Speaker 3 – Tim Stevens (Fine Art Underwriter, Hiscox)
You’re welcome and thank you for having me.
00:00:38 Speaker 2 – Sandy
Thank you.
Tim, before we get started, can you tell us a bit more about Hiscox and your role?
00:00:46 Speaker 3 – Tim
Of course. So, Hiscox is a global insurer working through Lloyds of London. We have 3 syndicates. We are the oldest syndicate at Lloyds, with our syndicate being Syndicate 33, the origins of which date back to 1901.
We are the original insurer of fine art as well, which started in the 60s under our honorary President Robert Hiscox.
But now, as a market we cover all sorts of lines of business sorts – kidnap ransom to terrorism.
And then also small commercials, so a real broad plethora of insurance there.
So, I started at Hiscox in 2019 as part of the underwriting graduate scheme and I did various things around the business, a bit of terrorism, a bit of commercial and a bit of strategy. I then moved into the fine art team in 2021 where I now reside. We are a team of five and we service clients worldwide, including here in Australia.
00:01:47 Speaker 2 – Sandy
So, to set the scene for today, can you describe what is meant by the term Collectibles?
00:01:54 Speaker 3 – Tim
Sure. So, a collectible is an incredibly broad term and intentionally broad for what we insure. So, you can think of your classic fine art examples, so paintings and sculptures and then also private jewellery, so ladies engagement rings, or gold watches – that sort of thing. But also, any sort of Collectible items such as sports memorabilia, or books, porcelain, event wine and spirits – so much out there that we insure and can insure.
00:02:25 Speaker 2 – Sandy
So, Tim, would Collectors be aware that they can insure their collection separately to say their household insurance?
00:02:32 Speaker 3 – Tim
So, I definitely think there’s somewhat of a lack of awareness of how to insure a Collectible, especially in the sort of high net worth market where they’re often picked up by what would be a contents policy.
And the issue is at the basis of valuation and indemnification they are quite separate, so they’re looking to replace something old for new which obviously can’t apply for a Collectible because you can’t replace it, sort of by definition. So, I think somewhere there is certainly that gap in the market for that insurance.
00:03:01 Speaker 2 – Sandy
Alright, thank you. And so, what is generally covered in a collectibles insurance policy?
00:03:08 Speaker 3 – Tim
So, when it comes to the Fine Arts side of things, we have an incredibly broad Coverage.
We write an All Risks Policy, which defaults to worldwide coverage. The key thing being that we are insuring it for physical loss and physical damage.
And as part of this indemnification process, we are looking to restore the item following the damage claim and also looking to indemnify the insured with a reduction in value that would appreciation settlement.
These are covered with nil excess as standard, so as soon as the loss happens the insured is covered.
We also cover things such as pairs and sets, whereas if an item is a set of various items such as a coin collection, if one of those coins is lost or damaged, the following depreciation of the set of coins will also be indemnified.
00:04:00 Speaker 2 – Sandy
In the event of a claim, what would a policyholder expect from Hiscox?
00:04:05 Speaker 3 – Tim
So, we are experts in the market, and we’ve been doing this for such a long time that we understand exactly how to indemnify a Collector.
And as I touched on earlier, that’s centred around restoring the piece as opposed to doing a cash settlement, understanding that a lot of the time this is a very emotional collection for someone and also sometimes has a historical value.
So, the aim here is to get that piece back to as good a condition as can be and then we also following that we’ll look at covering what we, the depreciation and value of that item. So, the insured is totally indemnified plus has that piece back that they want in their collection.
00:04:44 Speaker 2 – Sandy
OK. And do you have any examples of a claim?
00:04:49 Speaker 3 – Tim
Yeah, so, and this wasn’t actually a Hiscox claim per se, but one I think is very demonstrative of how this cover operates.
So, Le Reve a Picasso, was acquired by Stephen Wynn in the late 90s, which he bought for nearly $US50m, which he agreed to sell to Steven Cohen in 2006 for $140 million.
The night before he was selling the piece, he had a few friends over at his office for a private viewing and managed to stick his elbow straight through the canvas, creating quite significant damage.
The insurance at the time paid for the painting to be restored. It’s quite incredible sometimes how talented these restorers are.
So, for example they will stitch the microfibres of the piece back together which results in quite significant restoration, and then the insurers also paid a depreciation of value claim to Mr Wynn. Mr Wynn then sold it to Mr. Cohen in 2013 for $155m, so made a net profit after all, so all’s well that ends well.
00:06:02 Speaker 2 – Sandy
It’s a very good example.
00:06:04 Speaker 3 – Tim
On a slightly sort of separate note, going to the smaller side of things, and the jewellery side of things.
We had an insured, which had their diamond on their engagement ring, which was worth about $75,000 U.S. dollars. They were in an accident which resulted in the diamond being chipped.
Now, naturally, an engagement rings is quite an emotional item for someone. So, we’ve set the insured with two options – to either have that original diamond recut in the same shape, albeit smaller, or to have a new diamond put in place and of course with a smaller diamond, we would have paid for the reduction of value, right?
In the end, the insured actually opted for the bigger diamond, which I don’t tend to be too surprised about and, we took the chipped diamond back for our salvage and sorted it and so everyone’s happy there in that situation which I think again is quite a nice example of how we operate.
00:06:59 Speaker 2 – Sandy
That’s great.
All right. Thank you, those are great examples.
Are there any specific requirements a Collector needs to meet from the insurance perspective when they are seeking a Collectibles insurance policy?
00:07:11 Speaker 3 – Tim
Yeah. So, I think there’s sort of two angles here. There’s the first angle being the valuation piece. So, with what we cover, we have some items that are worth several million or several 10s of millions of dollars. In those situations, we need to have the comfort that those are being valued by a professional. What we always say is a credible valuer.
So, if you’re thinking something’s worth 100 million, you normally expect someone like Sotheby’s or Christies to tell you that.
Whereas, if you’ve got a coin collection that’s worth $10,000, perhaps a credible valuer there will be your local auction house, or you have someone in-house who understands what these items are worth.
On the separate side, you have how that Collection is protected. So again, it’s always relative to the size of the collection here. So, if you have very expensive items or drawings, for example, you expect them to be very well looked after and have very good alarms in place. Sometimes security depending on the profile of the insured and for example, safes they’re willing to withstand some pretty bad treatment by potential thieves.
And also, on the fire side of things, you’ll want to be understanding that there are precautions in place, again proportionate to its size of the insured.
00:08:28 Speaker 2 – Sandy
What are some of the main types of claims you see under a Collectibles policy?
00:08:34 Speaker 3 – Tim
In terms of volume as opposed to value, the vast majority are accidental damage, so your pretty standard – someone’s moved the piece from the living room to the kitchen and they’ve dropped it and it’s either smashed if it’s fragile or it’s chipped and you know, they’re normally fairly straightforward ones to settle and restore.
We also have, unfortunately, a few theft claims. The majority of these are with jewellery. Due to the nature of what we’re insuring here.
And also, art thefts are pretty stupid crime because their second hand value dramatically drops and is also there is now very good surveillance, very good understanding of where these stolen items are trying to be sold, such as the Art Loss Register.
And then we also naturally have fire claims, unfortunately, which tend to be a full loss, so it can be quite catastrophic.
And then we have your classic storm of what’s damaged, the pipes burst and ruined someone’s artwork, or we also have quite a few mysterious losses which are more driven by a jewellery portfolio – someone has gone out and their watch has dropped off their wrist or a diamond has fallen out of someone’s ring for example. Those are predominantly the losses that we see.
00:9:51 Speaker 2 – Sandy
Alright, thank you.
So, to close out this podcast I’d like to hear more about some of the more interesting or quirky Collectibles you’ve come across over the years.
A few years ago, the media over here told the story of a local person who built an actual house to store their 30,000 plus vinyl record collection.
What are some other examples you can share?
00:10:14 Speaker 3 – Tim
So, we’ve seen some pretty weird and wacky stuff.
I’m also quite fortunate to work with several large museums during my time so for example, we’ve seen someone’s had a Banksy drawn on their house and they’ve taken the wall off that side of the house and sold the wall and rebuilt it for themselves.
Which I thought was quite creative.
I’ve also insured a sculpture that had as a head a live beehive! That one was quite weird, but quite cool.
We also actually see so many interesting sort of Dutch master paintings. Monet, Manet. All lots of different movements. Pretty much, you name them we’ve insured them.
Musical instruments worth tens of millions. Really interesting sorts of violin collections, that sort of thing.
And on the memorabilia side, we have insured several World Cups. The actual cup itself and various different sports. So that’s always quite an interesting one to see.
And hold your breath as they put it out and cover it in champagne.
00:11:16 Speaker 2 – Sandy
Yeah, and drinking from it!
Alright. Thank you very much. That’s a great way to finish up.
So, thanks for joining me today, Tim.
For the listeners, you can find out more about the Collectibles insurance product by giving us a call on 1300 755 112.
Don’t forget that our entire podcast series is available on Spotify. Plus, we have links to each episode on ebm.com.au.
Thank you again to Tim from Hiscox.
00:11:44 Speaker 3 – Tim
Most welcome. Thank you.
