Superstorm Sandy painted a grim picture for Atlantic Coast residents as it pushed storm surge into places that have never seen saltwater, killing at least 132 people and causing an estimated $25 billion in losses to commercial and homeowners insurance, second only to Hurricane Katrina.
But the storm's unusual area of impact proved particularly costly to an industry rarely associated with Red Cross shelters and soup lines: the tony New York art scene.
Insurance Journal reports that fine art insurers face their largest single payout ever, a whopping $500 million, as the result of art gallery flooding in the Chelsea district of Manhattan and storm-damaged art warehouses across the Hudson River in New Jersey.
Hardest hit was a collection of work by 1960s psychedelic graphic artist and illustrator Peter Max that could cost art insurance firm Catlin some $300 million, according to an industry source. Catlin declined to comment, but Axa, the world's largest insurer of fine art, said it expects to pay out $40 million to its clients.
Sandy's art losses far exceed previous record payouts, including a $40 million loss when Las Vegas casino owner Steve Wynn accidentally put his elbow through one of his Picassos in 2006, and a $33 million loss from a 2004 warehouse fire in east London that destroyed works by British artists Tracey Emin and Damien Hirst.
"This will be the largest single art loss to the market," according to Filippo Guerrini-Maraldi, head of fine art at insurance broker RK Harrison.
Art insurers have long been uneasy that art warehouses were storing too much valuable artwork in one location, leaving insurers vulnerable to the type of devastating claims that result from fire, floods and named storms.
The fact that Sandy didn't even rate a Category 1 hurricane designation only increases their anxiety. One source told Insurance Journal that rates to insure artwork could spike by as much as 25 percent and some underwriters may refuse to insure high-ticket art in low-lying areas such as Chelsea.
"Some underwriters will lose appetite for writing fine art business after Sandy, the global capacity for fine art business will shrink, and as a result rates will go up," Guerrini-Maraldi predicts.
Further consolidation in a market that is already both fiercely competitive and increasingly reticent to roll the dice on Renoirs and Monets suggests that future art insurance rates won't be a pretty picture.
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