The global taste for art and art investment is creating an unforeseen risk as collectors hoard their works in warehouses and freeports. The Financial Times reports that the bulk of the world’s art is stored in only a few major freeports located next to international airports with tax haven status.
These Swiss, Singapore and other repositories house an average of $10bn in art, according to the FT, and that art (and the insurance companies covering that art) is vulnerable to something like an airliner crashing on takeoff or landing. For those who think the likelihood too remote, the FT reminds us that the 2004 MoMart fire in London several years ago destroyed a number of irreplaceable works.
The FT talked to Adam Prideaux of Blackwall Green:
Despite high-security warehousing, there is just too much value and too few insurers. They simply would not have enough funds to pay out in the event of a catastrophe. This has led insurers to think the unthinkable – and to start preparing to protect themselves against the worst possible scenario. What if an aircraft crashed into one of the free port warehouses adjacent to an airport? […]
Prideaux says the scenario of a plane falling on one of the free ports has put the risk into perspective: “Insurers went, ‘Yikes, we’ve got to go out and buy insurance to protect ourselves.’ So they started passing these extra costs on to clients. Everybody thought putting art into storage [offered] great security, [but] in fact, it was the exact opposite. There’s not one insurer that will take on new business in a free port now. They’ve got too much art there and they don’t have enough reserves. As the art market drives up and up… the way the insurers look at it is: what is the maximum possible loss at any one time? [That’s] their buzz word.”
He adds: “You can’t underestimate the significance of speculation and investment in the market at the moment. People buy works and put them out of sight. They don’t want them talked about [or] documented.”
Terrorists could target a free port warehouse. Concentration of priceless artworks also increases the risk of specialist thieves seeing such storage as a juicy target, and even an accidental fire becomes an unthinkable risk.