Editor's note: In a response to an e-mail query, New York-based Aris Title Insurance Corp., which writes insurance for transactions closing in the state of New York, explained the difference between insuring the provenance of a work of art and its authenticity. Because art as a form of personal property is mobile, the location of purchased art is generally not limited to one state, most art transactions in the United States inherently involve owners, dealers or transaction elements involving the state of New York, or by agreement of the parties, transactions will close in the state of New York. The vast majority of U.S. art transactions of significant dollar values will have the appropriate nexus to New York.
Steve Yahn: What is Aris' capacity in terms of
ARIS: Aris' capacity on a treaty basis is $5 million per work insured, and we can provide increased limits of liability on a case-by-case basis. Our capital comes from a number of private and institutional investors. The institutional capital providers are Ritchie Capital Management LLC., a multibillion-dollar U.S. hedge fund, and a private foundation called BCET, the Berger Collection Educational Trust. In addition to the invested capital, Aris is reinsured by Hiscox to assure the proper capacity and longevity of the product.
SY: If Aris can insure the provenance of, say, a Van Gogh, why can't Aris insure it's authentic?
ARIS: Authenticity and title, although related, are two very different issues. Authenticity is a matter of opinion, and well-advised clients can hire the appropriate experts on authenticity to provide an opinion as they already do on this issue, as well as for connoisseurship and valuation issues. Based on that opinion, the buyer can make an educated decision. Title, on the other hand, is based on a set of very complex fact patterns and variable laws. Unless a painting is being purchased directly from the artist's studio with no intermediary, the history of ownership will have gaps, and even works coming from the studio can present classic title risks. The dynamics in the art market as it currently stands make it impossible for buyers and sellers to be certain that no gaps in title or other risks to title exist. Therefore, the burden of the transactional exposure is one that buyers, seller and intermediaries should not take and is one that should be transferred to a third party (Aris) that can spread the risk over multiple transactions.
SY: How many policies have been written to date?
ARIS: Aris began offering art title protection insurance on June 5, 2006. We have had significant interest in the product and have received three submissions to date (requests to provide coverage) and expect to bind at least one of these in the next few weeks.
December 1, 2006
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