The Value of Valuations: Museum Buildings and Collections
Museums often approach Hayes Parsons Insurance Brokers for advice around how buildings and collections can be valued, and it remains a hot topic with far reaching consequences depending on those values. It is an old subject matter with enduring relevance due to the fact values have increased hugely in the last 2 years.
Most commercial buildings in the UK, including museums, are under-insured. Let’s look at an example to see why this is important.
Imagine your insurance policy says your museum buildings are valued at £3,000,000, for rebuilding purposes. You think that sounds plenty, and at your insurance renewal each year the figure gets carried over without question, or maybe with a modest increase each time. You haven’t paid for a rebuild valuation in many years and it hasn’t been raised by your broker.
Then a dreadful fire occurs, causing £500,000 damage. The Insurer sends the loss adjuster out to the site and reports back that the building has a true rebuild cost of £5,000,000. You are therefore 40% under insured and will in all probability see your claim reduced by 40%. That’s a £200,000 shortfall in your finances.
Our advice is simple; it’s worth employing the services of a Chartered Surveyor at regular intervals to value the rebuild cost of your buildings and update your insurance policy accordingly. The advice used to be to do this every 5 years, but some would argue a 3-year interval is better due to rapid rises in rebuild costs (approximately 10% on average this year alone). The 3-year review is definitely worth considering if you have Grade 1 listed property, as the rise in material costs for Grade 1 property has outstripped other sectors and it’s always wise to make sure your Chartered Surveyor has experience of valuing buildings like yours.
From fine art to former aircraft, classic cars to ceramics, and scientific objects to serene sculptures, the question is, what are any of these worth when we call them a collection? And what would you hope to happen if the worst should happen to a treasured item, or to a collection as a whole?
Again, let’s look at an example. You have a policy for the fine art at your museum and insure the collection for £2,000,000. Within that collection are some specific higher value items that are noted on your policy schedule. You have stayed with the same insurer and broker for many years, and your predecessor at the museum set up the policy over 10 years ago, and at the time had professional valuations carried out. The broker has not mentioned up to date valuations, and you seem happy with what is arranged.
Once again, taking the example of a fire, some of your fine art paintings in one room, are completely destroyed. The value of these items is £500,000. You thought the terms “agreed value” in your policy schedule meant you would get £500,000 and you could put the money towards other paintings to complement what is left of your collection. But the loss adjustor asks to see your most recent valuations and from that point onwards the insurer points you to their policy wording which says they will only pay the “market value” of items that have not had up to date valuations. The market value could be significantly lower and is a lot more subjective in terms of what the insurer will offer to settle the claim.
It is true that professional valuations of artwork, or other collections, can be expensive, but they are far less expensive than facing a much smaller pay-out than hoped for, from your insurer.
Get in touch
The general advice given here is designed to create a conversation. Each museum is different and has unique concerns. At Hayes Parsons Insurance Brokers we can tailor our advice to your own situation and would be happy to talk through your options. If you have any additional queries, please feel free to get in touch with our museum expert, Martin: