Brokers much like wealth managers when it comes to protecting high-end art collectors’ assets

Brokers looking to sell insurance to reluctant, high-end art aficionados might benefit from acting much like wealth managers in the business of protecting their customers’ assets.
Katja Zigerlig, vice president of fine arts, wine and jewelry insurance for AIU Holdings’ Private Client Group, made the observation in a seminar for brokers in Toronto on May 28.
Zigerlig began her presentation by noting that the sale of art is estimated to be a US$50-billion industry worldwide.
She then showed a slide of Andy Warhol’s ‘Green and Black Car Crash,’ which sold for a record US$72 million in 2007. The seller was on the list of people affected by the Bernie Madoff scandal.
The point she made is that clients can turn their art objects into liquidity very quickly. “Maybe you can get $17 million, or maybe you can get $1 million, but Warhol is cash, Warhol is currency,” she said.
“You can turn your Warhol into a liquid amount of money. It is an asset that you can sell for cash.”
And thus, brokers would benefit from acting like wealth managers in trying to get their clients to protect their assets.
She said reluctant art owners commonly tell brokers: ‘Why bother with insurance? It’s an original. I will never get it back.’
But very few high-end art claims actually result in total losses, she said. They are in fact partial losses that can be covered by Fine Arts insurance policies. And part of some insurance packages will include an array of expert advice on how to restore the value of the art if it is partially damaged.
She cautioned that specific Fine Art policies provide for some coverages that standard homeowners’ policies do not (for diminution of value, for example).
This is relevant because 52% of art theft claims are based on theft from a private home.
Zigerlig also observed that public art auctions during the global recession are accounting for less of the art sold, with private deals becoming more popular as art dealers wish to avoid conspicuous displays of wealth.
One feature of private deals is that the prices for which art is being sold are unknown, contrary to the relative transparency of public auctions. This makes it hard to know what the value of some art pieces may be.
Zigerlig encouraged brokers to convince their clients to have their art appraised not only to determine their value for insurance purposes, but also for estate planning and tax purposes.
“How can you plan for your estate planning, or make your budget, or plan for your taxes, if you don’t know the value of your stuff?” she asked. “In order for [clients] to leverage the value [of their art collections], in order for them to be very proactive about managing their finances and their wealth, and protecting their wealth, they really need to know what they have, and appraisals are an essentially important component of that.”