Art and specie

In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 for art and specie.

Key developments in 2018

Restitution is a growing danger for buyers. In the United States, the Holocaust Expropriated Art Recovery Act 2016 (HEAR Act) effectively extended the limitation period for Nazi-looted restitution claims and requires the return of property where there is “reasonable proof” of a rightful owner. In April 2018, in one of the first cases under the HEAR Act, a New York judge ruled that two artworks by Egon Schiele should be returned to the heirs of Fritz Grunbaum, a Jewish art collector. There was considerable evidence that the new owner knew of the heirs’ claims before purchase – the new owner had specifically named the heirs in the title insurance.

Meanwhile in Europe, Christie’s was accused of failing to investigate the provenance of a looted painting by Alfred Sisley. The artwork had been stolen from a bank safe in Paris by a Nazi official after its Jewish owner fled the city. Mondex, a Canadian looted art expert, identified the painting in the Einsatzstab Reichsleiter Rosenberg (ERR) database, an inventory of looted or stolen artworks, and contacted the heirs of the original owner. The dealer who bought the painting at auction in 2008 has promised to return it to the heirs, but is suing Christie’s for its value, arguing that the auction house had access to the ERR database and should have checked it before the sale.

The enhanced art title risk may impact both demand for and the terms of title insurance. Insurers should continue to emphasise the importance of good title, safeguarding insureds against restitution claims, which, although glamorised in recent Hollywood productions, are expensive, lengthy and mostly avoidable.

What to look out for in 2019

A trend to watch in 2019 will be the impact of blockchain technology on the art market. Its functionality as a secure database on which information can be held without the risk of interference, deletion or corruption, means that a blockchain could in theory act as an impermeable art registry, accessed only by those who have been provided with the means of unlocking it. All information relating to an artwork – including the historic provenance and insurance details – could be easily accessible. This would simplify underwriting and claims handling, and reduce administration – as well as help to resolve provenance or authenticity disputes.

However, a key challenge will be the link between the physical art and its digital record. Some companies are developing ideas to do this, such as Norman Ventures’ chainmarks – a type of unique physical fingerprints that are uploaded onto the virtual register – but no consensus has emerged. There is also the question of verification. If incorrect or corrupt information is added to the blockchain in the first instance, the value of the blockchain vanishes. Multiple blockchains, many of which are not connected, mean that we may also see inconsistent platforms or registers appearing simultaneously.

Given the pace at which progress is being made in this area, 2019 may be the year that blockchain takes hold in the art market.

Authored by Eleanor Wilson-Holt.

Download our full Annual Insurance Review 2019 for more insights.