Love affair with South African art creates fertile ground for theft and trafficking of rare pieces

As the hammer fell on R17.2 million for Irma Stern’s ‘Arab’ painting at a Strauss & Co auction on 11 June, setting an all-time record for South African art, Aon South Africa has advised art lovers to take special care of their original assets as art theft

Irma Stern’s paintings are no stranger to multimillion Rand price tags – her ‘Still Life with Gladioli’ sold at auction for R7.57m and at the time was also a record for South African art. Other well-known proponents of local art and highly desirable pieces include works by Pierneef, Boonzaaier and Laubser.

“The theft of cultural objects and works of art affects developed and developing countries alike and the FBI and Interpol have established dedicated units to deal with this escalating threat. The growing trend in illicit trafficking of cultural heritage and art is a transnational crime that is sustained by the demand from the arts market, the opening of borders, improvement in transport systems and in some instances, the political instability of certain countries. South Africa has not escaped the growing incidence of art theft and with the growing love affair between collectors and South African artworks, it’s a trend that art owners should be concerned about,” says Mandy Barrett of Aon South Africa, leading insurance brokerage and risk consultants.

“South African art continues to enjoy growing demand both at home and abroad and values continue to escalate. A cool R18 million could get you a prime beachfront property in the plush suburbs of Cape Town, however it seems that South African collectors understand the value of having a priceless artwork such as an Irma Stern on the wall. Seemingly recession proof, it was as recently as November 1999 that the R1m barrier was breached for the first time, again, as it happens, for an Irma Stern still life. Since then it has been a tale of growing demand and along with it, exponential increases in insurable risk,” says Mandy.

It’s a view echoed by Gordon Massie, managing director of specialist underwriters, Artinsure. “Fundamentally risk arises from theft, loss or damage and typically cover involves the likes of all risks, away from premises cover, transit cover and depreciation. The reality is that as prices soar, art and cultural property theft is a rapidly growing criminal enterprise in South Africa, the magnitude of which has beenhighlighted by the recent thefts of valuableand culturally symbolic art pieces.

“While incidents of accidental damage have dropped off, claims as a result of theft have increased by 9% in a five month period alone, comparing Nov 2011 with April 2012. Currently art theft claims constitute a significant 31% of all claims processed by Artinsure. Thefts are taking place from galleries, museums and private collections by highly organised syndicates who are finding fertile markets for their stolen pieces. South Africa has been hit recently by two highly organised syndicates that deal in sought after, commoditised art and are playing on buyer’s greed to ply their trade.

“Given the increased risk and the complexity around correctly scoped insurance covers for these appreciating assets, art owners need to get a professional specialist valuation, rather than a generalist’s valuation, and then agree on a value with your insurer. A specialist insurer knows how to manage any potential claims in respect of art properly and most of all, understands that your asset is an appreciating asset,” says Gordon

Aon’s Mandy Barrett adds: “Art prices are determined by among other factors the nature of the piece, the size of the collection and the risk management applied to protect the item or items. Factors such as the value of pairs and sets have to be understood and correctly priced to ensure adequate cover. With artworks fetching these record prices, specialised insurance has taken on a fresh dimension and scope. Art collectors, whether individuals, corporates, auctioneers, antique or art dealers require appropriate broker intervention to make sure their priceless assets are properly covered against loss.”

Thirty-two art works have been placed on Artinsure's theft register for South Africa in the last three months and according to the FBI, art theft is a lucrative criminal enterprise, with estimated losses running as high as $6bn (about R40bn) annually worldwide. For the knowledgeable art thief it’s easy to store an asset such as this until the time is ripe to sell it to the reportedly growing black market in art and artifacts. That’s notwithstanding interventions such as the Art Loss Register, which has auction houses Sotheby’s and Christie’s as shareholders.

“Moreover, the art world has been rocked recently by cases of fraud and it’s become necessary to provide for defective title cover for ownership dispute to protect against cases such as this.

“It’s all about specialised knowledge and experience and this market is very different when compared with insuring everyday household items or physical assets such as vehicles or property. There’s also a need nowadays for expanded benefits and value adds such as cover for temporary storage should a client’s premises be compromised. It’s all about providing a true value proposition based on a working knowledge of the art business and with thousands of South Africans now owning art collections and their importance as asset portfolios growing, there is a need for world class insurance solutions for those who collect, sell, create, restore, exhibit or transport works of art, antiques, collectables and other high value memorabilia,” explains Mandy.

“More and more risk is being written locally and that’s helped to contain premiums. The old practice of insure art as part of the contents of a home or an office are long gone and in light of the appreciating values of so many local artworks and the demand for them, specialised covers for rare, valuable or collectable pieces is essential,” concludes Artinsure’s Gordon Massie.