How to manage, price and insure your most precious possessions

Art enthusiasts, collectors and investors may have different motivations for buying paintings or sculptures, but many may need guidance on how to acquire, manage, preserve, protect and, most importantly, value their art.

This is the view of Tarina Vlok, MD at Elite Risk Acceptances, a subsidiary of Old Mutual Insure, who says there is a lot of business behind collecting art, with the accurate valuation of an artwork being central to all subsequent decision-making.

“If you know the value of your artwork, then you are less likely make common mistakes like not insuring it or insuring it at too low a value,” Vlok says. She suggests having artwork professionally valued, and revisiting that valuation annually.

Figuring out how much an artwork is worth presents some challenges

“Creativity, novelty and subject matter all contribute to value, but components like art market demand, provenance, scarcity, and historical significance are important too,” says Nasiphi Gwagwa, founder of ArtVisory Africa, an art advisory consultancy in South Africa. She is studying an MBA/ Masters in Arts and Cultural management at IESA and Paris School of Business, with her thesis focusing on Art and Price: How an Artist Becomes Valuable.

Artwork is valued through professional appraisals and they use of information like auction results, and websites like ArtFacts and ArtPrice to gauge market value. Corporate financial services executive turned entrepreneur Karabo Morule, founder of Capital Art, says that not many art collectors track the values of their works as part of their holistic financial planning. Capital Art is a platform that hosts a web-based art collection management system, for both local and global collections, where collectors can track an estimated value of their art collection in up to two currencies.

“As an art collector, having your finger on the pulse of what you have in your portfolio and how much it is worth helps you comprehend the value of your art collection, and seek to protect it over the long term,” Morule says.

She notes that, when collecting art, it is important to be mindful of the fact that the value of art changes.

“If you are buying artwork from someone who is actively working on their career, then the value of that person’s artwork may change as they progress in their career. That means if you bought a piece early on in their career, years down the line it may have increased significantly in value. This is one of the reasons it is important to keep accurate records when collecting,” says Morule.

Trends that are impacting the world of pricing

Morule says it is refreshing that collectors are treating art as an asset class, and that investors who do, are seeing significant returns.

Gwagwa says technology is another trend. “Technology has had a significant impact on the art world and online art marketplaces have made it easier for artists to sell their works and for collectors to discover new artists and acquire works from the comfort of their own homes.”

Blockchain technology is also being used in the art world to create secure digital records of art transactions and provenance, making it easier to track ownership and authenticate artworks.

When it comes to insurance trends, Vlok’s view is that accurate valuation is non-negotiable when seeking insurance cover for art.

In fact, the insurance industry standard is for the art owner and insurer to agree the replacement value of an artwork before it is placed on cover; this agreed value is the base for compensation following a loss. According to Vlok, you should start thinking about how to protect your art from damage, loss or theft from the moment you fall in love with a piece.

“It is common for art lovers to snap up a painting or sculpture at an auction, gallery or show and promptly forget to add the piece to their insurance policy, or collect the painting without checking with their insurance broker that the work will be on cover while in transit,” she says.

Art collectors need to consider various factors after placing their art on cover too. “It is important for art collectors to familiarise themselves with their insurance policy wording as insurers may have different approaches to the section of the policy artworks are insured under; collectors who loan their artworks to galleries should also discuss the potential exposures with their insurers,” Vlok says.

She adds that including a painting or sculpture in the household contents section of a personal lines policy does not necessarily ensure cover for specific situations such as transporting a painting to and from a gallery.

These and other potential hiccups highlight why art collectors should partner with insurers who understand their unique needs and appreciate that art is irreplaceable.

“Art is a tangible, visual asset class; whether or not you like a particular piece should be the first consideration for your investment rather than the name of the artist or the price of the artwork: the piece must speak to you,” says Vlok.

Collectors can reach out to insurers who value outside assistance with the cataloguing and managing art collections. An example of this is the Capital Art and Elite Risk Discount Program, which is beneficial to all levels of art collectors, from the newbie with a single painting to a professional collector with 100 or more artworks.

“For a collector, collect knowledgeably, catalogue properly, insure accordingly, and then find sharing spaces with others to engage with the work too,” concludes Gwagwa.