PropertyCasualty360.com - 07/12/13
By Bonnie Cavanaugh
When Hurricane Katrina was bearing down on New Orleans in August 2005, most people were thinking of evacuating to higher ground.
Charlotte Edmonston, a high-net-worth producer working in Baton Rouge, La., was thinking about eggs. Faberge eggs, to be exact.
One of her high-net-worth clients living in the path of the oncoming category 5 hurricane happened to own the largest collection of rare Faberge eggs outside of Russia: a collection so vast that it can hardly be valued, let alone insured for any reasonable amount, she says.
“When Katrina came through, I was freaking out about those eggs. It was very, very expensive to insure them,” Edmonston recalls. Losing them would be a huge loss for the client, and even though the collection was not covered under a collector’s policy, the items were also of great historical value.
So she did the next best thing she could.
Edmonston, who is the National Niche Managing Director for broker Arthur J. Gallagher, phoned the woman’s insurer.
“Even though we don’t insure them for their value, they’re insured as contents,” she says. “Her insurance carrier sent a conservator to her house and had them boxed up and shipped out of Louisiana, and stored until after the storm was over and things got at least reasonably back to normal.”
That was typical of HNW insurers prior to Katrina, says Richard Kerr, president and CEO of electronic insurance exchange MarketScout and founding member of the Council to Insure Private Clients. HNW carriers “sent in people like Blackwater in helicopters” to help HNW insureds pack and store precious items, he says.
Such meticulous handling of precious items has become more standard with private-client carriers, as fine art has become more valued as an investment during the recession. More often than not, HNW carriers are adding an art specialist to their private client staff to handle these collectible investments.
Fireman’s Fund added a Director of Fine Art position earlier this year; AIG has a resident art collection management staff; and ACE’s Risk Consulting division provides management for a variety of high-end collections, including Fine Art.
“Clients are looking for a very, very deep well of experience and expertise in capabilities,” says Jerry Hourihan (pictured), senior vice president, AIG Private Client Group. “It’s complicated; it’s not as easy as coming out with a new homeowner’s policy.”
His group insures more than 40 percent of the Forbes 400 richest Americans, as well as 50 percent of the top art collections in the United States as per ARTnews, the oldest and most widely circulated art magazine.
“We insure over $40 billion of collections business,” Hourihan says. The company’s collections worldwide include expensive and complex risks like multi-million dollar coin collections, or $100 million art collections.
“You’ve got to have very flexible underwriting and an approach to providing coverage for these kinds of things,” he says.
EPIC (Edgewood Partners Insurance Center), a retail property, casualty and employee benefits insurance brokerage in San Francisco, partners with Chubb representing its programs for the Historic Motorsports Association (HMSA), an elite club of HNW individuals who purchase winning race cars as the drivers retire from the track, says Stan Sanchez, a principal at EPIC. Then they race them.
“They race their cars eight to nine times a year. The program is very strict in what types of cars can participate,” says Sanchez. EPIC insures the cars on the track, and Chubb insures them off the track.
“A lot of these cars that are on the track are worth $23 million-plus,” Sanchez adds.
Chubb Group has been insuring collector cars for 40 years, says Jim Fiske, U.S. marketing manager for Chubb Personal Insurance.
Insuring these “rolling valuables” not only caters to the company’s clientele but serves as a gateway to introduce Chubb to VIP consumers who may not already be clients, he says. Current insureds include the Aston Martin owners club in the U.K., and the Ferrari owners club in the Netherlands.
“It’s advantageous to be a global carrier when your clients want to take their Ferrari over to Italy to run in an event,” Fiske says.
The company also provides its private clients with a consumer lifestyle e-magazine, Accent by Chubb, which details vacation spots and collectibles that are of interest to the HNW consumer.
This perk has done a lot for customer retention levels: customers who have received the digital magazine have better retention than those who haven’t; and those who’ve read it and clicked through content have better retention than both of those groups, he says.
“Our customers like to know that someone is an advocate for them,” Fiske says. “We understand what’s important to them.”
Martin Hartley, chief underwriting officer and a founding member of Privilege Underwriters Reciprocal Exchange (PURE), New York, recently fashioned a policy to insure a client’s sneaker collection that includes rarities like prototypes and first-press models, some of which are valued in the tens of thousands of dollars.
Sneaker collecting is a huge hobby worldwide, with its own e-zines, such as Sneaker Freaker Magazine, and trade shows: New York City hosts the quarterly Sneaker Con.
Knowing the passions and hobbies of the HNW individual is essential because many times, the clients don’t think of insuring these items, Edmonston says. One of her customers owns a yacht that has a helicopter and two submarines on board for his passion of preserving undersea reefs and wildlife.
“A majority of clients never think of those kinds of things as being exposures because it’s so normal for them,” says Edmonston. “You have to really dig it out of them.”
Another client forgot that he owned an electric-powered Smart car, which he’d stored in the barn of his $12 million home in Virginia. “Somebody found it and drove it,” she says. “He called up wondering if he should get insurance on it.”
“They’re like that,” agrees EPIC’s Sanchez. A large purchase like real estate, which would be a major life event for most people, is a normal day for the HNW client.
“All of a sudden they say, ‘We bought three homes a month ago in Las Vegas,’” Sanchez says. And now they want homeowner’s insurance. “They’ll say, ‘We bought them for cash, so we didn’t think about it.’”