Risk management and insurance are two different but interrelated functions when discussing adequate collection care and protection. Protection in the context of this article will mean indemnification not physical security although care can and should, include physical security considerations. This article is not meant to be all inclusive and should be viewed as a starting point for further discussion and observation.
In the insurance industry, risk is defined as the uncertainty concerning the occurrence of a loss. Risk management includes the concepts of avoiding, preventing, and minimizing loss. You must realize insurance does not look to do anything about risk; they consider the above concepts in order to rate the risk for actuary to price out. [To clarify, an actuary is a person who compiles and analyzes statistics and uses them to calculate insurance premiums.] One reason insurance companies have risk departments is to assist their client’s or prospective client’s in reducing their premiums by pointing out problematic risks in the property that the client desires to insure.
The purpose of collection risk management is to identify those areas which, if not addressed, will leave the collector or his insurer exposed to a financial loss. The collector has a fundamental responsibility to provide safe and secure conditions and environment for all collections to be insured. This includes lighting, relative humidity, temperature, pollutants, contaminants, and other elements and factors that may affect the status and condition of any part of the collection. The care and welfare of the collection is a primary consideration in determining if and under what conditions an insurer will provide coverage.
The risk management process consists of 3 basic steps:
Developing risk protocols: Risk protocols are the guidelines, procedures, tools and methodologies that have been adopted for use.
The implementation and ongoing evaluation of protocols
RISKS to collections, whether the collection is fine art, wine, dolls, glass or ceramics, can overlap with the same risks the structure is subject to. To state the obvious, exposure to water and fire are serious risks. However, there are numerous other risks that can affect the well being and insurability of your collection. Heat will turn paper items brown and dry them out to the point of crumbling to the touch. Are you hanging your works on paper over or near a heat register or fireplace? Heat will also cause your wine collection to prematurely age and quite likely dry out the cork, leak and subsequently oxidize! Freezing will cause certain materials or supports to shrink and get brittle. Light, particularly Sunlight will fade or discolor certain mediums used on paper as well as the dies used in the paper itself. Children and pets come with their own inherent risks, primarily breakage. However, pets also have the tendency to scratch and pee on things as well as rub up against stuff. Natural oils in the fur or hair will transfer to the items being rubbed. Remember – your pieces that are in storage must not be ignored. Roisin O’Regan, from the FTAdvisor website | Published Aug 28, 2012, wrote an interesting short article on this.
Protocols must be written to address the identified risks. Protocols should outline specific actions that need to be taken to correct any deficiencies such as;
Artwork hung in direct sunlight
Items stored near or over the furnace
The displaying of sculpture, glass or ceramic in an entryway
Artwork hung over “working” fireplaces
Inadequate hanging systems
Lack of sufficient fire and theft protection
These protocols need implemented and re-evaluated to ensure the risks are mitigated. Without follow-through nothing changes, your collection will still be at risk. Environments will change, structures will age, periodic re-visiting of the risks and protocols must occur to address these changes. Your insurer may have different reasons (significant financial impact) than you for the protection of your collection, although the end result should be the protection, preservation and continued enjoyment of the collection that you spent significant time and money to assemble.
Collection management is an important part of accumulating an exclusive collection. Emerald Art Services, LLC works with you and your insurer to identify the risks to your collection and develop protocols to mitigate these risks to keep your possessions beautiful for years to come.