A Calculated Risk on Art

Automotive insurers nowadays offer a ‘black box’ for your vehicle (either GPS hardware or via a smartphone app) and incentivise good driving with reduced annual premiums [1].

Why not adopt the same concept in the art world?

Art Condition and Insurance

Any art collection needs insurance against transit, theft, fire and flood but insurers generally do not cover ‘gradual damage’ from environmental conditions, since it cannot be determined when the damage first started [2].

Extreme or fluctuating levels of light, humidity, temperature or air pollution can cause substantial long-term damage to collections, both superficially (as colour fading) and structurally (as breakdown of the chemical bonds in the artwork).

We can infer the following from Technical Report 157, published by the International Commission on Illumination (CIE):-

Even a very low light level of 50 Lux, sustained continuously over one year (approx. 3000 hours) would result in a light exposure of 50 x 3000 = 150,000 Lux-Hours per year.

If the artworks contain silk, wood-pulp based paper, nylon or light-sensitive pigments or dyes (such as indigo, turmeric or bismarck brown), the recommended maximum light exposure levels set by the CIE are 15,000 Lux-Hours per year [3].

The objects in question would be suffering 10 times the recommended light exposure, resulting in long-term light damage, which is cumulative and irreversible. Any deterioration in their condition can also affect the market value of the collection.

In the case of transit, fire, flood and theft, compensation is available from art insurers to collectors. This is not the case unfortunately for gradual damage from environmental factors, meaning that this very real risk is currently uninsured.

Black Box Art Insurance

A ‘black box’ style insurance for the art world would require a closed-loop system in which the monitored environmental parameters decide when to shut out the light on an art collection, stabilising the fluctuations in temperature and humidity.

If the art world were to adopt this new type of ‘telematics-based’ insurance, collectors would be able to

  • improve the condition (and market value) of the objects displayed
  • prove good behaviour to the insurer and
  • receive tangible financial benefits in return.

But would art insurers be incentivised? After all, the risk of gradual damage is not covered, right?

That is right, but if the market value of the damaged collection falls over time, the insurance premiums payable to insurers may also fall. In the worst case (for the insurer), the artwork is so damaged that the client cancels the insurance policy altogether.

Hence, art insurers have a vested interest in reducing risk on art collections since this translates into better condition of the artwork, which translates into higher market value and continued (hopefully increasing) premiums.

Below is a comparison of both scenarios:-

A) No Black Box Insurance

  • Even if you take measures to mitigate risk on your collection, without black box insurance, you have no way to prove it to the insurer.
  • If you are not taking such measures, any resulting deterioration in the condition of your collection may reduce its market value, hurting your investment.
  • Reduced market value may reduce the premium payable to the insurer, so the insurer may also be hurt.

Collector loses:

Reduced value of the investment.

Insurer loses:

Overall net decrease in premiums collected.

B) With Black Box Insurance

  • With black box art insurance, the collector can offer quantifiable proof to the insurer of proactive risk mitigation and (possibly) improved condition.
  • Any clients who are deemed by the insurer to be ‘good collectors’ (because the data indicates so) may receive discounted premiums or refunds (just as in the automotive sector).
  • The black box itself protects both the art condition and the market value.

Collector wins:

Increased value of the investment, discounted insurance premiums and an improved reputation as a collector, which could help the provenance of the artwork.

Insurer wins:

Overall increase in premiums collected, despite the discount given to good collectors.

Index of Risk

ArtRatio has been working for several years on the concept of a ‘Black Box’ for art collections, which measures environmental factors and post-processes the data in the cloud to calculate the risk of damage to the collection. We have delivered working systems to museums and private collectors across Europe since 2012.

You can see some of our installations here.

Each ArtRatio vitrine reduces environmental risk by cutting out light using a smart glass facade.

Furthermore, processing the data in the cloud allows us to correlate rapid fluctuations in environmental factors and excessive swings over time, resulting in the ArtRatio Index of Risk, a single number which models the risk of long-term damage to the collection.

The Good Collector

If you are an avid art collector and have taken out the necessary insurance, you can rest easy about the risks of transit, fire, flood and theft.

You may even have invested in UV protection glass, infrared window filters and environmental control measures to keep a check on temperature and humidity.

However, unless you already have a Black Box insurance policy for your art collection, you are not going to see any dividend from the insurer for your good behaviour.

It is only by adopting the ‘Black Box’ (telematics) approach that collectors and insurers will see tangible rewards for the proactive measures taken to reduce environmental risk on art collections.


1. Which.co.uk Money “How Black Box Car Insurance Works”

2. Chubb.com “Collecting Art and Art Insurance” (section 3).

3. “Control of Damage to Museum Objects By Optical Radiation”, Technical Report 157:2004, International Commission on Illumination

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