Fine art insurers face claims of up to half a billion dollars, their biggest ever payout, to compensate the owners of artwork destroyed when Hurricane Sandy flooded galleries in New York.
Work by 1960s graphic artist and illustrator Peter Max accounts for the bulk of the loss, landing insurers including Catlin Group with a claim of $300-million (U.S.), an industry source said.
“This will be the largest single art loss to the market,” said Filippo Guerrini-Maraldi, head of fine art at insurance broker RK Harrison.
Catlin declined to comment.
AXA, the world’s biggest art insurer, expects to pay out $40-million, art claims director Colin Quinn said, and brokers and underwriters say the total loss could reach $500-million.
That would wipe out virtually a full year’s revenues for the art insurance industry, forcing it to push up its prices.
“Some underwriters will lose appetite for writing fine art business after Sandy, the global capacity for fine art business will shrink, and as a result rates will go up,” Mr. Guerrini-Maraldi said.
Galleries and art warehouses affected by Sandy could be forced to pay up to 25 per cent more for insurance, and insurers could refuse to cover premises in low-lying areas of Manhattan against floods, one underwriter said, asking not to be named.
Sandy, which killed 132 people as it swept through the northeastern United States on Oct. 29, caused flooding in the Chelsea district of Manhattan, where many New York art galleries are located. Art warehouses in New Jersey were also affected, insurers and brokers say.
Sandy is expected to cost the insurance industry a total of $25-billion, making it the second costliest storm after Hurricane Katrina in 2005.
Art insurers have previously expressed concern that popular art storage warehouses accumulate too much costly artwork in a single location, exposing them to big losses if the facilities flood or catch fire.
The art insurance industry, led by AXA and Bermuda-based Hiscox Ltd., takes in between $500-million and $600-million a year in premiums.
Art insurance prices have been falling for several years, reflecting stiff competition and a generally low level of claims.
Payouts worth a combined $500-million would dwarf previous big art losses, which include a £20-million ($33-million) hit from a 2004 warehouse fire in east London that destroyed work by British artists Damien Hirst and Tracey Emin.
In 2006, U.S. casino owner Steve Wynn put his elbow through a Picasso he owned, resulting in a claim of about $40-million.
Art insurance payouts are sometimes lower than the initial claim because of adjustments to reflect the market value of the artwork.Report Typo/Error