Risky business - Museums Association

Risky business

Insurance raises questions about risk, responsibility and the value of collections that are at the heart of what museums do. By Katrina Burroughs
Katrina Burroughs
Insurance. As a topic, it probably doesn’t make your heart beat faster. It’s not a conversational theme with which to dazzle a first date.

But for museums in search of ways to stretch a shrinking budget, it pays to take an interest in this unalluring field, because tailoring insurance cover could save serious money. Insurance also raises issues that go to the heart of museum practice: risk, responsibility and the value of collections.

Michael Freeman is the curator of Ceredigion Museum in Aberystwyth, whose exhibits include a large local archaeology collection. He says assigning an accurate financial value to this collection is problematic.

“I’d say we’ve got perhaps 500 items worth more than £1,000, but nothing worth more than £5,000. We could get someone in to value the whole collection, but if it was done professionally, it would cost a great deal. Would that be a good use of our money?”

Even when a professional valuation has been carried out, insurers may ask for a regular update. Freeman says some museums update valuations by a fixed percentage each year, but points out that this method can’t be absolutely accurate: “Some types of museum object go up in value and others down.”

Amanda Wallace, head of asset management and development at Manchester City Galleries, expresses another concern that many of her colleagues share: “The terms and concepts of insurance do not fit with how we see and value collections.”

She explains: “For instance, collections would not be ‘written off’ because they were not economically viable to conserve. We would seek in all cases to retain and restore what we had. If our Ford Madox Brown was completely fragmented, we’d do everything we could to salvage it.”

Museum professionals take their responsibilities as keepers of culture very seriously, and see insurance as one of the ways they can protect their collections, but they also question how far cover can help them.

Simon Cane, head of museum operations at Birmingham Museums & Art Gallery (BMAG), oversees a varied collection, from steam engines to the Staffordshire Hoard.

He describes the balancing act of collections insurance: “We’re the guardians of the collections and we have a duty of care. We also live within the realities of funding, and we must always seek to get best value.” He adds: “The real issue is should you insure for loss? If you’ve got something that’s fundamentally a unique resource, what is insurance for if it can’t be replaced?”

Cane’s words find an unlikely supporter in Adam Prideaux of broker Heath Lambert, a specialist in museum cover: “Insurers apply pressure on collections to have up-to-date valuations of works, but commercial value is meaningless to museums. They can’t sell them and mostly you can’t go out and replace the lost work.

“Museums are an astonishingly good risk for insurers, because they look after their collections so well,” says Prideaux. For this reason, he suggests old-fashioned belt-and-braces cover can be inappropriate, and advises his clients to identify specific risks.

Prideaux says the real danger is often accidental damage – moving things around and dropping them. “If you were to cover just that you’d reduce your premium to between 5 per cent to 10 per cent of what it was before.”

Of course, he’s not advocating such a bare bones approach, but he does argue for cautious reductions in cover. How do insurers feel about his suggestion?

“It is inflammatory in the insurance market,” Prideaux says. “It suits us to have higher premiums but, as a supporter of museums, I can see it’s not sustainable.” Commercial insurance isn’t the only option.

Some of the UK’s 2,500 museums are aided by the state insurance solution: the Government Indemnity Scheme (GIS). All publicly funded collections, including the 54 national museums, 650 local authority museums and 91 university museums, are eligible for cover, but only those applications that meet security and environmental conditions will be accepted.

The scheme’s main aim is to facilitate loans and travelling exhibitions by providing the borrowers with an alternative to commercial insurance. Objects on loan are insured while on display, in transit and storage, and the scheme claims to save museums about £5m a year in premiums. If you’re receiving a loan exhibit, the GIS is a godsend, but what about if you’re a lender?

Cover isn’t offered on outward loans. Pauline Webb, collections manager at the Museum of Science and Industry in Manchester, has being dealing with the GIS since the museum came under the department for culture in 1986.

“As far as [lending] your own collections go, they don’t promise anything. Fortunately, we’ve never been in a situation where we’ve had to test it.”

Webb also points out that museums covered by the scheme are unable to seek commercial insurance for permanent collections.

“It’s government policy for exchequer-funded bodies to bear their own risk. You can understand why,” she says. “For some museums with high-value collections, Tate for example, the premiums would be so great that you would be giving away public money to the private sector with no public benefit.”

Nick Brett of Axa Art, a major provider of insurance to museums, confirms that not all lenders are satisfied with the terms of the GIS. “Sometimes there will be a disagreement over what the item is worth,” Brett says.

“If the lender can’t be persuaded to let the work be indemnified at the lower value, then the solution is to go to the commercial market and we can provide top-up cover to bridge the gap.”

Museums not covered by GIS have to make their own arrangements, for loan exhibits and their permanent collections, in the commercial insurance market. And, with opinion in museums divided on the suitability of existing policies, and cash becoming ever tighter, some museums and galleries are beginning to reassess the kind of cover they should pay for.

Last year, as part of Manchester City Council’s insurance renewal process, Wallace came up with a groundbreaking report and some startling suggestions on saving cash.

“We [were paying] £184,000 for all risks cover, with so many conditions and exclusions, including a £200,000 excess, that it was not fit for purpose.” She collaborated with Prideaux of Heath Lambert to review the cover.

The pair faced several challenges. Manchester Art Gallery owns stellar art works, from Thomas Gainsborough to Antony Gormley, and the value of the collection has kept premiums high. There had been some ill-conceived efforts to control the cost.

Wallace says: “In the past, efforts to drive down premiums had resulted in higher excesses, reducing the first loss limit to £100m, less than a third of the value of the collection, and another constraint, that we could only claim 75 per cent of the value of a loss.”

In other words, tinkering with the detail of the policy had made the expensive cover unfit for purpose. “The cover we had didn’t deliver anything of benefit whatsoever.”

To further complicate the picture, decisions on the collections’ cover were made at one remove from museum staff, by Manchester City Council.

Against this unpromising backdrop, Wallace and Prideaux came up with a recommendation for the gallery to refocus cover on restoration and theft recovery, with no excess, for the collection, and “all risks” for loans.

They also suggested an enhancement that covered catastrophic loss – due to extreme events such as explosion, terrorism, etc. This would give cover for up to £100m, with an excess of £5m, on the basis that below £5m wouldn’t be a catastrophe.

In brief, the pair devised a way to slash the premium to less than £30,000, a measure that Wallace says would allow the gallery to safeguard key posts and have funding left over to invest in two new posts linked specifically to risk management.

Other museum professionals have been finding equally ingenious variations on conventional collections’ cover. Freeman, of Ceredigion Museum, says: “Our collection is covered by a commercial company for all events except accidental damage and theft without forcible entry, which is covered by the council’s own fund.”

This clever compromise between commercial cover and self-insurance can only be achieved if there is a sufficient pot of council money that can be called on, if needed. Rather like the GIS, it is a gamble, but one the council is being canny about.

Freeman says that the council puts aside a certain amount each year for insurance for possessions such as school buildings, but that it “only self-insures accidental damage and theft without forcible entry, which is a low financial risk”.

Cane at BMAG has considered the key risks to the collections he cares for and has tailored the cover appropriately. “We have fire and flood cover for all of our collections on display and in storage.”

Of course it’s not quite that simple – insurance isn’t. Specific high-value items are insured separately, items on loan have policies approved by the lenders, and certain other exhibits have insurance dictated by conditions of acquisition that specify a certain level of cover.

Like Wallace, Cane isn’t in sole charge of decision-making, and his cover is bought as part of a bundle with Birmingham council’s other insurance. “It’s a commercial package managed corporately, and therefore more complex because it’s tied up with the city’s overall approach to insurance.”

Many collections are insured as part of a local authority portfolio, and this has helped drive up premium costs. “I’ve seen insurance that was set up in the 1970s unaltered and the premiums waved through every three years,” Prideaux says.

“This is partly a function of the complexity of their insurance arrangements. If you take a local authority, the cost of the museum’s insurance is a small proportion of its premium, which also covers a liability for schools, hospitals and local authority housing… and often there’s no real interest or understanding of the collection.”

In the end, it was on this rock that Wallace’s attempt to save cash for the gallery foundered. Scaling back the commercial insurance for the collection to focus on a few key areas proved too radical a step for the council to countenance.

“The treasurer would not contemplate removing cover for ‘catastrophic loss’ and was incredibly risk-averse when it came down to personal accountability and impact on the city’s reputation should there be seen to be ‘no cover’.”

In fairness, the public does expect museum and gallery collections to be safeguarded, and it would take a brave public servant to drop traditional precautions.

Did they make any savings? “The premium has gone up by £14,000,” admits Wallace, who is understandably disappointed that her suggestions haven’t been implemented. Still, her ideas will have caught a few eyes in these cash-strapped times and she is optimistic that they will be adopted next time the premium is reviewed.

“In theory we could have saved £150,000 – more than we get from retail and catering combined. It was a really exciting prospect. In three years’ time, we’ll make a stronger case.”

Katrina Burroughs is a freelance journalist

Contacts and information sources

For more information on the Government Indemnity Scheme, visit www.culture.gov.uk

See the related information on the Museums, Libraries and Archive Council’s site www.mla.gov.uk (the body that administers the GIS). Also helpful are the loans standard guidelines at www.nationalmuseums.org.uk

For independent museums, there is a focus paper on risk management and insurance by Adam Prideaux at www.aim-museums.co.uk

Heath Lambert, tel 020 7234 4312

Axa Art, tel 020 7265 4600

Image: installing Antony Gormley’s Filter at Manchester Art Gallery in 2002

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