Insurance premiums for New York galleries, which were expected to catapult after Hurricane Sandy inflicted catastrophic damage on the Chelsea district in 2012, have surprisingly dropped to pre-storm levels.
A price hike seemed imminent after insurance companies paid out an estimated $300m in Sandy-related claims. While rates did spike in 2013, when they rose between 3% and 20%, “over the past few years we’ve seen rates go back to pre-Sandy levels,” says Robert Pittinger, a senior officer at Axa Art Americas.
Rather than collapsing, shares in insurance companies rose after Sandy as investors anticipated a premiums’ hike. However, that expectation was confounded: no insurance company wanted to lose business in the neighbourhood, so rates dropped as the companies undercut each other, according to LeConte Moore, a managing director at DeWitt Stern, one of the largest art insurance brokers in New York.
The bullish investment can be explained by the highly competitive nature of the art insurance business. Compared to other insurable categories, “stuff doesn’t happen to art” very often, Moore says. “People handle art with care: they put on white gloves, they package it specifically. They take good care with art whether it’s a Tiffany lamp or a Picasso.”
Nonetheless, Sandy was a “wakeup call” for companies to stop writing undifferentiated “cookie-cutter” policies, Moore says. Requirements for coverage are a lot stricter now. One gallerist said that its rates went up by 20% or so after Sandy but only for about 18 months. While the gallery is happy that premiums have since dropped, the gallerist says: “It’s complicated—we now have to go through different measures in order to obtain a reasonable rate.”
Insurance companies now routinely send engineers to individual galleries, and have specific requirements about conditions. Certain Chelsea galleries have had to make diverse evacuation plans so that dealers will not all be using the same method to get art out of the neighbourhood if another storm hits.
Some dealers appreciate the insurance companies’ new-found attention to detail. “In the storage areas, everything needs to be higher, emptier, more neatly positioned,” says Bortolami Gallery founder Stefania Bortolami. “It’s not a bad thing at all.”