Recent years have seen a substantial increase in the severity and frequency of natural catastrophe events of all kinds, from hurricanes and floods to wildfires and droughts. For art stakeholders, including institutions, dealers and owners, such events pose a substantial risk to the safety of collections. Taking steps to proactively mitigate this risk is crucial to avoiding a major loss.
The rising risk of a catastrophe event
Global natural catastrophe losses reached USD 328 bn in 2024 (opens a new window); this is significantly higher than the 10-year average of USD 254bn, according to SwissRe. Among a multitude of perils, the disasters contributing most to the accumulation of losses were hurricanes Helene and Milton, severe convective storms in the US, large-scale urban floods around the world, and the highest ever recorded natural catastrophe insured losses in Canada.
In 2025, the trend is set to continue. This year’s notable losses began early, when the Palisades Fire broke out in the Santa Monica Mountains of Los Angeles County on 7 January 2025. The highly destructive wildfire burned for 24 days before it was fully contained on 31 January, scorching 23,448 acres of land. Early estimates of the scale of the insured loss (opens a new window), from data analytics provider Verisk, put the sum at between USD 28-35bn.
Various factors combined to complicate efforts to extinguish the Palisades Fire. According to climate scientists, the conditions for ignition were created by a climate ‘whiplash’ (opens a new window), including unusually wet winters in 2023 and 2024, resulting in strong vegetation growth. This was followed by a record-breaking 9-month drought. Combined, these factors created a large volume of combustible material. Smaller weather events also played a role during the fire, including strong winds (which accelerated the spread of fires, and led to the outbreak of smaller fires).
Reported losses from the Southern California wildfires include over 30 works by Andy Warhol (opens a new window), Keith Haring and Damien Hirst, as well as hundreds of musical scores by Arnold Schoenberg. But this is unlikely to be a one-off. The expansion of urban areas continues to increase the volume of wildland-urban interfaces (WUIs) globally. Combining combustible wildland material with heightened human activity and potential ignition sources, these areas are especially prone to fire. According to the Financial Times (opens a new window), the percentage of new homes built in US zip codes of “severe” or “extreme” risk of a climate disaster reached 57 per cent in 2023, before a slight fall in 2024.
The impact on art stakeholders
As the frequency and severity of extreme weather events increases, it is no longer a matter of “if” a catastrophe loss event occurs, but “when” and “where”. For owners of art, the most obvious impact of a loss event is financial. But many losses are difficult to quantify. Lost works are often one-of-a-kind, or they may hold unique sentimental value that cannot be compensated in financial terms or easily replaced.
Art institutions can also suffer financial loss due to an extreme weather event. But in such cases, lost artworks can bring further difficulties: such as reputational damage (if artworks have been improperly stored), or business interruption should it affect an impending exhibition or display.
From an insurance perspective, the complex nature of natural catastrophes can also complicate efforts to carry out an efficient loss adjustment process. “Nat cat” losses are typically high in volume and while unique, highly interrelated and similar. Analysing these claims can take time and resources, complicating efforts to determine the full extent of loss. During the Palisades Fire, loss adjusters were also unable to access affected properties due to the large-scale evacuation order in place.
While the loss adjustment process remains ongoing, art stakeholders – be they individual or institutions – can find themselves short of liquidity. What’s more, as natural catastrophe events become more frequent and severe, stakeholders are likely to find cover harder to find, limited, or more expensive.
Mitigating catastrophe risks
The evolving climate threat has reshaped traditional understandings of art and its risk exposure. Underwriters are now more aware of climate issues than ever before, and artworks are increasingly viewed within this context.
Moving artworks is very risky and is the leading cause of claims. As such, art stakeholders should focus on ensuring that artworks are stored in locations that are fully fortified against risk. Buildings should be well constructed, maintained in line with current standards, and easily accessible if an evacuation is required.
Broader risk mitigation principles include:
Understand your exposure – Until they occur, catastrophe events can be extremely difficult to envisage. Art stakeholders should work to understand their specific exposures, including the likelihood of a natural catastrophe, the assets on site, and the potential scale of any damage.
Know your priorities – Prioritising artworks can help to limit the extent of loss, should one occur. This may involve storing high-value artworks, or those with significant sentimental value, away from exposed locations. In the case of institutions, it may be worth implementing specialised safety protocols for highly valued works.
Strengthen your protection – Investing in preventative measures is crucial to limit the extent of loss, although will depend on the resources that individuals/institution have available. Cost-effective measures include storing packaging materials on-site in case artworks need to be evacuated at pace, or by arranging local contacts in advance to help facilitate the evacuation. Similarly, dividing the collection between different storage locations (including different rooms, or properties) can avoid a collection-wide loss.
Develop a contingency plan – The implications of a catastrophe may extend beyond the loss of the artwork itself. For instance, an art institution may suffer damage to revenue and reputation if a fire occurs at an artist’s studio prior to a display. Organising backups or transporting works to a secure location well in advance of an exhibition can help to mitigate this risk.
Organise insurance solutions – Fine Art Insurance can be a valuable tool to protect against financial loss. For stakeholders with an existing policy, the value of the insured collection should be reviewed on a regular basis to ensure an adequate level of cover. While dedicated insurance should cover artworks against all perils, this may not be the case where artworks are covered under a Household Insurance policy. A broker can help determine the extent of your coverage and whether your collection is suitably protected.
Many insurers offer dedicated guidance for art stakeholders and collectors, and specific services to mitigate risk, including wildfire protection, hurricane protection, and advice for the storage, crating, and documentation of artworks. Insurers will also be able to advise on reputable storage facilities, to be used if artworks need to be transported.
Additional guidance, including how to protect yourself and your home during a natural catastrophe event, can be found here:
https://www.ready.gov/hurricanes (opens a new window)
The role of Parametric Insurance
Fortunately, insurance solutions are evolving to offer new forms of protection against natural catastrophe losses.
Parametric Insurance is a transparent, data-driven form of alternative risk transfer solution based on pre-determined claims settlement following a specific triggering event. For instance, a gallery owner or art dealer may be exposed to loss if a flood or wildfire event impacts another contact within their supply chain. In such a scenario, traditional Business Insurance policies, which are typically triggered through direct property damage, would not respond.
Offering a complement for a lack of cover or liquidity, parametric products provide policyholders with a guaranteed payout within 30 days of a qualifying event, if certain triggers are hit. This timely receipt of compensation can be vital for owners or institutions – for instance, to mitigate against further loss, or conduct necessary repairs – without waiting for the loss adjusting process to conclude.
Parametric products draw on a wide range of data to set and calculate appropriate triggers. This can include modelling of future wind and hurricane tracks, sea temperatures, ocean currents or atmospheric patterns (e.g. Gulf Stream, El Niño), elevation maps and propensity to flooding across specific areas.
For more information on insuring your artworks against natural catastrophes, reach out to a member of our team.
More insights are available via our Fine Art and Specie (opens a new window) page.
Some of the contents of this article were originally delivered at an event organised by Lockton in collaboration with PAIAM, on 29 April 2025.
