May 20, 2013
Swiss offer military bunkers as art storage answer
A metal door set into a mountain in Switzerland offers a way out for fine art investors forced to pay over the odds to insure their collections.
The doorway leads into a disused military bunker, one of several being sold off by the Swiss government and whose echoing, climate-controlled chambers, once used to stockpile munitions, are being put forward as ideal storage space for works of art.
The 57-year-old bunker near Lake Lucerne, marketed as a site to store valuables and on offer at 386,000 Swiss francs ($417,000), could relieve a huge concentration of costly paintings at the world's biggest fine art vault in Geneva, the storage option of choice for wealthy buyers worldwide.
That warehouse, prized for its high security and its location in Geneva's tax-exempt freeport zone, holds art worth about $100 billion and has space to accommodate more.
But insurance underwriters, fearing ruinous losses if the facility were hit by a fire or an art heist of the kind that struck Rotterdam's Kunsthal museum earlier this month, are raising the cost of insuring any more paintings under its roof, or even refusing cover altogether.
"If you are a prudent insurer you want to make certain that you know how much risk you are exposed to at a certain location," said Nick Brett, underwriting director at AXA Art Insurance, the world's biggest specialist art insurer.
"There's an awful lot of art in Geneva freeport, and as insurers we have to make sure we don't expose ourselves to just one place."
The cost of insuring paintings stored at the Geneva facility has doubled over the last three years, Brett estimates. Investors who stockpile art in an equally secure location without the same concentration of risk can expect to pay up to 50 percent less to insure it, according to Richard Nicholson, fine art specialist at insurance broker Willis.
The insurance impasse at Geneva, replicated at other specialist art vaults worldwide, comes as wealthy investors fleeing volatile stock and bond markets are putting money into paintings instead and need places to store them.
Soaring art sales have increased the volume of work in storage while also boosting its price, causing a build-up of value at the world's art vaults, and creating an unforeseen new risk factor for the insurance industry.
Art investors want new storage space to cut their insurance costs, and would use converted military bunkers provided they met the necessary security and climate control requirements, said Enrique Liberman, president of the New York-based Art Fund Association.
"It really depends what they do with the space rather than the space itself," he said. "If you expand the number of warehouses a lot of the risks inherent to storing art might be mitigated, because they won't be so overcrowded."