COVID-19: Fine Art and Specie Insurance in 2020

In the world of Insurance, one thing has been constant since 1686: the face-to-face arrangement of Insurance in Lloyd’s of London. Until Friday 20th March 2020.
 

For the first time in its history, Lloyd’s has closed its underwriting room, so as to comply with the UK Government’s instructions in the fight against the spread of Coronavirus. This raises a serious challenge to an industry that has depended on face-to-face interaction for 334 years – can we successfully work from home, managing our clients’ needs as we always have done?

Do we have an adequate alternative to running into Lloyd’s to broke a Risk and get a line down? The short answer is “yes” – we have Placing Platform Limited (PPL), but this is still in its infancy, and most Brokers are currently using this platform to place only a small proportion of their portfolios. This is the first real test of the system and the expertise of those who use it.

Now is the time that our historic institution finally joins the modern world, and catches up with other world-class financial markets. Certainly, Brokers and Underwriters can survive with Skype, email, telephones, and a trading platform such as PPL, and Howden UK (R K Harrison is a division of Howden UK) has a very robust and well-tested system allowing their people to work remotely without issue, but the nature and feel of our market must surely change without actual, physical interaction.

And what about our clients? Now that many governments across Europe have greatly reduced the freedom of their citizens to leave their homes, those Fine Art, Cash and Precious Metals Dealers without an e-commerce facility will find it especially challenging to trade successfully. Several bullion brokers have long-standing and successful online platforms, but those without such systems may also struggle to trade effectively in this state of lockdown – especially as investors’ focus moves away from the global stock markets toward the tangible assets (such as gold), as it so often does at times of economic uncertainty, and trading frequency increases. Even for those who are tech-savvy, the bullion industry is hugely affected by restrictions to global travel: raw material cannot get to the refineries, who cannot despatch the processed bullion – the supply chains are compromised.

Dealers find themselves strictly limited to the amount of bullion they can order, or worse running out of product entirely, and therefore unable to meet demand from their customers, which of course costs them income as well as reputation. For the Cash industry, this time presents a related logistical issue. Although people’s movements are becoming restricted, cash in ATMs must still be replenished with the normal levels of security and bank staff in attendance. Bulk transits of currency are being affected by the reduction in air travel, and the resulting delays create a shortage of storage space, which creates a need for increased insurance limits at many key storage locations.

Furthermore, following a new piece of legislation, Art Dealers are now obliged to conduct due diligence checks on all clients – new and existing – which will make trading harder again. It is also worth noting that some Insurers are considering their position regarding future losses or damage caused as a result of any communicable disease or pandemic, which we feel should not be applied to a Physical Loss or Damage Policy. We are lobbying hard
against that attitude.

So, faced with these issues, Howden UK – and the whole Lloyd’s Insurance Market – must work remotely to maintain continued smooth service to our clients whilst upholding our existing trading standards. No mean feat – but one that all service businesses face in these challenging times.

Finally, it remains to be seen whether the market will see a spike in Fine Art accidental damage claims from bored children playing around at home, kicking footballs through paintings…! (Which, incidentally, would be covered as accidental damage.)
For all these challenges, and those which may not yet have revealed themselves, Howden UK and R K Harrison are prepared.