Insurance is usually a pretty cut and dried business, unless it involves insuring against the loss of fine art work; then a number of complicating factors enter the calculations, including the fact that many people passionately love the works of art they collect.

Those who can afford fine art work buy it for a number of reasons, including investment and its cultural and historic value. But most buy it because they love it.

"You cannot buy insurance for the passion you feel for a piece of art," warns LeConte Moore, fine arts specialist for the DeWitt Stern Group, insurance brokers in New York City. Moore deals with wealthy individuals who own substantial art collections.

Because you can't insure love or protect against its loss, Moore and other experts involved in the field say it is even more important than usual for a financial advisor with clients who collect fine art to know their clients and understand all their quirks.This rule of thumb has become even more important as art work, particularly Impressionist and contemporary paintings, as well as sculptures by well-known artists, continue to escalate dramatically in value.

In recent months record sales prices have been set for a number of artists, records that frequently last only until the next auction. Collectors from Asia and elsewhere around the globe are now competing for works, pushing prices up, says Theresa Lawless, director of art and collections for Fireman's Fund Insurance in Novato, Calif. "Theemerging wealth in China, Russia and India is fueling competition for art work. Major museums are being opened up around the world, plus there are museum-quality collections in the hands of individuals, and prices are being driven up exponentially."

The volatile market makes correctly insuring the works more important than ever-and more difficult, says Moore.

"A person could buy a piece of art at $10 million and three months later it is worth $15 million. You must make sure the insurance policy can respond to that turn in value," he says. "Because insuring art is very different from other types of insurance, you have to make sure the valuation clause is sufficient. If you have a loss of some other type of property you can find out what it is worth, even after the loss, if necessary. With art it is very different. There is a unique valuation to art that is not easily defined, and you can have three different opinions of that value. The value must be stated in the policy and the policy must be able to respond to the current market."

That can mean appraising works frequently and adjusting the policy to respond to that appraisal. Tam St. Armand, executive vice president of Ventura Insurance Brokerage Inc. in New York City, says most wealthy art collectors are aware of this requirement. "If by chance they aren't, they may be sadly surprised. For that reason, you need a financial advisor or risk manager who truly understands art."

Some new products that are being rolled out for insuring art include title insurance to guarantee the collector has clear ownership. This is becoming more important as ownership of World War II era works come under scrutiny. Another new product covers art conservators when they make mistakes while restoring a piece, something that was usually not covered in the past, St. Armand says. "There is a learning curve for the marketplace for some of these products," she says, "but we are working to educate the public."

In an unusual instance, Ventura was able to get a policy underwritten by Lloyds of London that covered war damage to some works, coverage that usually is not available. The unusual nature of the business makes it more important for collectors and their financial advisors to work with companies that know the art world, St. Armand advises.

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