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Fine art and specie is a class of insurance available to clients across sectors and in countries around the world. Graham Hawkins, global chief underwriting officer of fine art and specie at XL Catlin, discusses how advances in technology are impacting some of the most prominent risks for clients and considers the benefits brought about by international insurance programmes.

What is fine art and specie coverage?

Fine art and specie insurance coverage spans a multitude of client risks, from fine art collections to the cash-in-transit exposures of companies moving large volumes of money or valuable items. Buyers of this type of insurance range from local jewellery retailers to world-famous auction houses; they typically have exposures in several countries, and their risks are evolving.

What are the risk management implications for companies that transport cash, and how is this risk evolving?

Although there have been huge advances in the way transactions are carried out, money still needs to be transported from A to B. Transporting cash brings with it a host of risks. Cash management services companies need to manage the risks of robbery, hold-up or hostage-taking, for example. These companies tend to have global operations and there are some territories where the security risks are higher or where the risk environments might change depending on political or socio-economic factors. They are also hugely sophisticated and work closely with brokers and insurers to manage and transfer those risks. Technology is changing the way cash management services companies operate and, therefore, some of the risks they face. For example, in recent years, some retailers have begun to use so-called smart safes, in part to manage the risks to them of holding cash on their premises. These safes are able to recognise cash as soon as it is deposited in the safe and immediately credit the retailer’s account. This means that the risk of theft of the money may be transferred to the cash management services company at the point that the note is deposited in the safe. Risk managers need to keep up to speed with changes such as these, and insurers must make sure that their risk transfer offerings match the shift in risk.

Are technological changes affecting the way luxury goods companies operate? How does this affect risk management and insurance?

 Advancements in technology are changing the way luxury goods companies operate. For these companies, brand reputation is paramount. These companies are increasingly looking at new technologies in order to manage processes and risks to their brand, and blockchain is one development that many are looking at. For companies involved in the mining, trading and retail of diamonds, for example, the use of an authenticated blockchain ledger to securely track and trace precious stones enables sellers to authenticate the provenance of the diamonds they are selling. It also can enable consumers to be sure about the origin of their diamonds.

In the art world too, blockchains offer the possibility to track the provenance of works and to securely trace documents such as proof of purchase or certificates of authenticity. This technology may only be used for certain areas of the market. But there are certainly advantages for some fine art and specie clients, and insurers must adapt to these changes. Insurers themselves are looking at ways that blockchain can be used in their own business models, and seeking to understand the risks and opportunities that this technology presents for clients.

How can international programme structures help fine art and specie clients to manage their risks?

Fine art and specie clients, particularly cash management companies and global luxury brands, tend to be international and often have a physical presence in the countries in which they operate. In many cases, insurance regulation requires these local operations to have local policies in place.

Global programmes can help to make sure that coverage is as consistent as possible.  Compliance is a hugely important requirement, so a multinational insurance programme is an efficient way for them to stay on top of new and developing regulation. Global programmes also can give risk managers good visibility over their exposures and losses, as they are centrally controlled. Increasingly, clients chose to retain some of their risk in a captive, and if they use a fronting partner can reinsure some of that risk back into their captive.

 This article first appeared in International Programme News.

  • About The Author
  • Global Chief Underwriting Officer, Fine Art & Specie, AXA XL
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Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.