Art and specie
In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 with regards to art and specie.
Key developments in 2017
As anticipated in last year’s review, the Cultural Property (Armed Conflicts) Act 2017 received royal assent on 23 February 2017, which marks the UK’s implementation of the 1954 Hague Convention for the Protection of Cultural Property in the Event of Armed Conflict. The Act is designed to protect cultural property in the event of armed conflict and came into force on 12 December 2017.
The Convention requires states to implement policies that encourage the protection of cultural property in their own states and externally, but does not extend to the destruction of property by terrorist groups such as Islamic State and Boko Haram. Such groups call for the destruction of cultural property of other religious groups, while at the same time funding themselves through the sale of cultural property on the black market.
The looting of artefacts is said to represent a major source of income for some terrorist groups. Indeed,recently there has been a vast increase in the supply of antiquities from Syria and Iraq, and evidence of widespread looting of archaeological sites has been mounting. Unsuspecting purchasers could find themselves in possession of looted property if they do not carry out thorough due diligence to establish clear legal title.
Given the increasing attention paid to this issue by the press and politicians, and the potential for claims for defence costs and loss from forfeiture applications, insurers should continue to be mindful of the need for insureds to conduct robust due diligence to establish provenance.
What to look out for in 2018
Insurers will be well aware from other sectors of the risks associated with, and potential losses arising from,cyber crime. Now increasingly moving into the art world, cyber criminals are stealing large sums of money from art galleries using a simple email deception, which allows hackers to access galleries’ email contacts to transfer client funds to fraudulent bank accounts. Similar techniques are used to intercept payments made by galleries. The sums lost are significant and are said to range from £10,000 to £1m.
The prevalence of cyber crime in the art industry is only likely to increase in 2018, because cyber criminals see a business that frequently operates on a handshake basis as easily exploitable and because the technologies employed are often not as robust as those in other sectors. The fast-paced transactions and large sums of money changing hands make it particularly attractive for criminals. At the same time,the consequences for failing to have adequate systems and controls to prevent loss of personal data will increase in May 2018, when the General Data Protection Regulation comes into force. It will provide for businesses to be fined up to 4% of their annual turnover for such failures.
Insurers may well therefore see an increase in demand in 2018 for policies extending to cyber crime and defending investigations by the Information Commissioner, as well as associated claims, as galleries continue to fall victim to cyber criminals.
Download our full Annual Insurance Review 2018 for more insights.