Risk Management in Museums: Insights from an Insurance Perspective

Aon, in partnership with AXA XL

In cultural preservation, museums are guardians of invaluable artefacts, art, and history. This responsibility comes with inherent risks that can challenge the integrity of collections and institutional operations. 

Given the increasing frequency of weather-related and other catastrophic events and security concerns, we recommend that museums and institutions maintain accurate valuations and risk mitigation strategies to ensure collections are protected and that their insurance coverage is adequate in case of an unexpected loss. These aspects are becoming more critical, particularly when considering the stricter underwriting criteria being applied by insurers, as well as the pricing ramifications. This practical guide, presented by Aon and AXA XL, provides insights from an insurance perspective. 

Understanding the Risk Landscape

Museums face multifaceted risks, ranging from natural disasters and theft to security breaches and conservation challenges. Recognising these potential threats is the initial step towards effective risk management. An in-depth risk assessment is essential to identify vulnerabilities and devise targeted risk treatment strategies. These strategies can vary from simple measures, like ensuring smoke-free premises, to more complex solutions, such as strategically positioning sprinkler systems to avoid water damage. Each museum’s needs are unique, and one-size-fits-all solutions may not apply. 

Tailored Insurance Solutions

Insurance serves as a critical tool for mitigating potential losses. The bespoke nature of museums necessitates tailored insurance coverage. Collaborating with insurers who specialise in cultural institutions can help ensure that the scope of cover aligns more appropriately with the unique needs of each museum, be it an expansive collection or a singular masterpiece.

Standard Material Damage policies, also known as Industrial Special Risks, may not adequately address the specific needs associated with insuring artwork and valuable collections. These policies often come with high deductibles or broad exclusions, leaving more minor losses uninsured. In contrast, specialised fine art policies typically offer more favourable terms, including nil deductibles, broader coverage and additional bespoke features like cover for transit and loans to other institutions. 

Appraisal Accuracy for Adequate Coverage 

Accurate valuation of collections is the cornerstone of ensuring adequate insurance coverage. Regular appraisals by qualified professionals provide a reliable basis for determining appropriate insurance limits. In the event of a claim, meticulous documentation of appraised values aids in swift resolution and claims settlement. 
Specialised fine art insurance policies often rely on “agreed value”, which requires detailed recordkeeping to itemise and assign values to each object. These policies, however, also recognise that not all items may be individually listed and may cover un-itemised artworks at market value. Reviewing the insurance policy’s “Basis of Settlement” or “Basis of Valuation” is also crucial to understanding how items will be covered in case of loss. Best practice management involves maintaining an itemised database of all artwork and objects in the collection and revalued every three to five years, where possible. 

Holistic Risk Mitigation

Comprehensive risk mitigation transcends insurance. Robust security systems, fire suppression measures, and disaster preparedness protocols are all instrumental in minimising risks. Collaborating with experts in risk management can help museums devise customised strategies that align with their collections, exposures, locations, and goals.

Collections Management

Insurance considerations extend to collections management decisions. When contemplating deaccessioning or loaning pieces, museums should assess the impact this may have on insurance coverage and update their policies accordingly. Transparent disclosure and communication with insurers during such transitions are essential. Many institutions have a standard practice requiring evidence of proper fine arts policy before loaning items. This is often confirmed by providing a “Certificate of Currency”, a one-page summary outlining coverage on insurer letterhead. 

When items are lent to another party, it is best practice to establish a formal loan agreement. This agreement should specify:
•    The owner’s name. 
•    Which party is responsible for insurance during the loan period. 
•    A description of the items being loaned. 
•    The agreed-upon value of the items. 
This practice protects both parties and streamlines claims resolution in case of loss or damage. 

Cybersecurity and Data Protection                                    

In the digital age, cybersecurity is vital. Museums store sensitive information, including details about patrons and donors, necessitating robust data protection measures. Cyber insurance can help protect against potential breaches, aiding reputation preservation and financial recovery.

Emergency Response and Business Continuity

Disasters can strike at any moment. Museums should have comprehensive emergency response plans in place, ensuring the safety of staff, visitors, and collections. Additionally, business continuity strategies can aid in minimising disruptions to operations and preserving the institution's reputation.
Navigating the risk management landscape for museums requires a proactive and multifaceted approach. Engaging with insurers who understand the intricacies of cultural institutions, investing in accurate valuations, implementing robust security measures, and crafting comprehensive emergency response plans are pivotal steps towards safeguarding collections and ensuring the long-term sustainability of museums. By collaboratively addressing risks through insurance and proactive measures, museums can thrive as cultural custodians while confidently navigating potential risk challenges.

About Aon New Zealand

Aon is a leading provider of risk management services in Aotearoa and around the globe. We exist to help shape decisions for the better, providing our clients with advice, understanding and solutions that give them clarity and confidence in their decision-making.

When it comes to art and collection valuations, this means providing our clients with accurate valuations for tangible and intangible art and heritage assets, forming the basis for effective financial planning, risk management and informed decision-making that fosters long-term resilience.

About Ben Ashley

Ben Ashley is Aon New Zealand’s Principal Art and Collections Valuer. Drawing upon over a decade of large-scale art and collection appraisal experience, he has extensive knowledge of market trends and valuation methodologies. Ben has worked in private practice and auction houses throughout New Zealand and as an art insurance claims consultant in Australia, the UK and the USA. Ben is supported by Aon’s Valuation Services and Risk Management Solutions teams.

Contact Ben today to learn how he can support you with art and collection valuations.

Ben Ashley | Principal Art & Collections Valuer
+64 21 151 1841 | ben.ashley@aon.com | aon.co.nz 

About Des Partridge

Des Partridge is AXA XL’s Head of Specialty for Australia. He has over a decade of underwriting experience in multiple specialty classes, notably in the fine art, specie and jewellers block industries.

Des Partridge | Head of Specialty, Australia
des.partridge@axaxl.com | axaxl.com

This website contains general information only and does not take into account your individual needs or financial situation. It is important to note that limits, excesses, terms and conditions and exclusions apply to the products and services outlined on this website. Please refer to the relevant policy documents for details of cover, the provision of which is subject to the insurer’s underwriting criteria that apply at the time. Please contact us if you have any questions.