Supporting fine art ESG targets through insurance

David Saillen, head of fine art and specie, continental Europe at Liberty Specialty Markets, highlights how insurance can play a role in helping support ESG in the art world.

Art has long captured history’s greatest social movements. As the world invests brainpower, money and time to understand and incorporate sustainability practices into all areas of business and life, the world of contemporary art has questioned the implications for society and our environment.

The fluidity of these trends means that everyone involved, particularly the insurers acting behind the scenes, must be astute to the needs of artists, collectors and galleries, ensuring that we understand these trends and the impacts they can have on risk management and risk transfer.

Digital art experiences

This year, virtual or digital art experiences leveraging new technologies are becoming increasingly common. We have already witnessed the rise of immersive experiences in big cities throughout Europe, and at this year’s Art Basel we saw a new satellite fair called the Digital Art Mile, fully dedicated to digital art.

While transforming the ways in which the public can view and interact with art, it is also reducing carbon footprints as it eliminates the need for shipping physical artwork around the world for temporary exhibitions. This cuts emissions from transportation, as well as reducing waste from single-use packaging and crating. It also increases accessibility, bringing works to a much broader audience, who might otherwise struggle to travel to or access exhibitions.

While advancements in virtual reality, 3D modelling and interactive digital experiences provide an engaging alternative for museums and visitors, insurance providers would need to contemplate potential cyber risks involved with digitising high-value artwork.

Earlier this year, a prominent museum software provider fell victim to a ransomware attack on systems that supported over 800 clients globally. The incident left a trail of disrupted online collections and potentially compromised sensitive information, sparking a conversation around the need to secure digital art assets.

In recent years, cyber attacks have become more prominent and are only growing at the threat level. The challenge for insurers is to adapt policies for emerging cyber threats to protect museums and their public from these risks, without stilting the adoption of new technologies.

Transportation

Despite advancements in technology, nothing can truly replicate the experience of seeing artwork in person, and insurers and art logistics companies are working out how to transport art in a way which minimises the environmental impact while ensuring utmost care and security.

For artwork that must be physically transported, the industry should transition to reusable, circular shipping containers rather than single-use wooden crates that are often discarded after use.

Together with reducing material waste, insurance providers could confidently cover shipments using recertified reusable containers that meet professional packaging standards. A more circular model for art shipping is an easy win for sustainability.

Rethinking climate controls

Climate control requirements are currently imposed on many art storage facilities and museums. Maintaining narrow temperature and humidity ranges can be incredibly energy-intensive, especially for older buildings.

When looking to unlock significant energy savings for art-holding institutions, insurance providers could reevaluate acceptable ranges, allowing more flexibility and variation if it does not risk irreparable damage to artworks.

Similarly, heritage museums face the challenge of retrofitting historic buildings to meet modern sustainability standards without compromising architectural integrity or artwork preservation. London's National Gallery, housed in a 19th century building, undertook a £35mn project to install energy-efficient lighting, climate control systems and renewable energy sources, reducing its carbon footprint while safeguarding its priceless art collection.

Ethical governance and provenance

The illicit trade of stolen and looted artworks also remains a significant issue. In 2019, the FBI recovered over 500 cultural objects worth millions, highlighting the need for robust provenance verification measures. Insurers have implemented rigorous due diligence processes and collaborate with law enforcement agencies to combat the trade of illicit cultural property.

On the governance front, insurance plays a crucial role as a gatekeeper preventing unethical and illegal practices like money laundering, stolen art trafficking and the destructive looting of cultural heritage sites.

Underwriters aim to catch any red flags and deny coverage for artworks with questionable provenance. However, this is complicated when it comes to major institutions that built their collections in eras when cultural acquisition practices were very different from today's standards.

Insurers must thoughtfully navigate how to uphold ethical principles and their mission to help protect the world’s cultural heritage as one critical element in the risk management strategy.

Increasing diversity of perspectives

As these complex issues illustrate, the art and insurance industries need a diverse range of perspectives and voices, across gender, race, disability and life experience, and geographic diversity, to be involved in examining sustainable practices and developing solutions. The art market was and remains an early mover in the discussion and promotion of diversity and inclusion.

Tackling ever-changing issues like environmental impact, ethical governance and equitable representation is no easy feat for artworld incumbents, but insurance providers have an opportunity to be catalytic voices ushering in more sustainable, ethical and inclusive practices.