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'All bets are off': Hong Kong protests cause insurance headaches for dealers heading to Art Basel

With pro-democracy demonstrations showing no sign of abating, the fair is working with a broker to offer galleries cover at 20 times the normal rate

Insurance policies will be affected if the Chinese government decides to reclassify the Hong Kong protests as terrorism © MEMEME/Alamy Stock Photo

As dealers struggle to insure works of art bound for Hong Kong, where pro-democracy protestors continue to clash with police, Art Basel in Hong Kong organisers say they are working with a local insurance broker to offer cover—at 20 times the normal rate.

“Insurers are insuring for Hong Kong very sparingly. They are being quite choosy and they are doing so for a lot more money,” says Chris Bentley, a director of underwriting at AXA insurance firm.

According to an email sent to exhibitors, Art Basel says it can “offer ‘public liability’ at HK$4,200-HK$12,600, depending on booth size, and ‘all risks’ cover (including in cases of strikes, riots and civil commotion [SRCC] or acts of terrorism at the show) for artworks at a rate of 2.1% of the sum insured”. Cancellation insurance, payable if the fair does not go ahead, is not included. However, Art Basel is offering to refund 75% of the booth cost in the event of cancellation, and has also reduced the withdrawal fee.

Bentley says the “standard rate” for insuring works at a fair is 0.1%. To put that in context, a work insured for $1m would cost around $21,000 to cover for ABHK, compared to a standard rate of $1,000. “Given how tight dealers’ margins are at these fairs, I would be very surprised if many can afford to pay the additional insurance,” he says.

Another concern is that most dealers usually only insure the artist’s percentage of the work, rather than the full value. “Even in the event of a disaster, we would still not receive anything by way of compensation,” says one dealer who wishes to remain anonymous.

At the moment with Hong Kong, all bets are off.

There are three types of insurance available to exhibitors at a fair: all risks, which is the basic damage cover; terrorism and SRCC, which has to be purchased separately; and cancellation or contingency insurance, which would cover dealers if Art Basel in Hong Kong—due to run from 19-21 March—was cancelled. “No one is offering [cancellation cover] at the moment because of the uncertainty,” Bentley says.

Filippo Guerrini-Maraldi, the chairman of the private wealth division at RK Harrison, says: “Works are still insurable, but under different terms and conditions. At the moment with Hong Kong, all bets are off. If you want to buy that coverage you have to seek it from the terrorism market.”

Before the protests began in June, Bentley says terrorism risk in Hong Kong would have been insured at around 0.03% per annum. He says his colleagues are now selling that cover at around 0.15%—five times higher.

The semantics of what constitutes civil commotion versus terrorism is causing insurers to take a particularly conservative view. Terrorism is typically defined as something that is ideologically motivated; however, there are concerns that if the Chinese government labels civil commotion as terrorism, “then that will have a very material impact on people’s expectations for how their insurance policies will respond”, Bentley says.

For Hong Kong, the long-term prognosis is also precarious. Bentley says: “There’s a bigger worry, which is what the protests will do to the economy of Hong Kong in the medium to long term. If you’re insuring dealers in those economies, and they start to underperform, then an economic crisis tends to see an increase in insurance claims. There’s change afoot there and it will affect us.”