A new insurance company are trying to plug what they see as a gap in the market for auction guarantees between $10,000 and $1.5m.
Based in Palm Springs, California, Art
Auction Guarantee (AAG) launched in 2011 and are offering the
service to both buyers and sellers in major auction locations
around the world.
The auction world is used to
guarantees for sellers, but this scheme also allows buyers to pay a
premium guaranteeing at least the hammer price they paid for it
when reselling.
Although policies don't cover all the
costs of buying and selling at auction, they will cover at least
the reserve for sellers, explained AAG's president, Arnaud
Aquizerate.
Potential clients will have to drill down
further into the details (see How it Works) to
see whether it makes sense for them to opt for such cover - buyers
can negotiate policies that refund the premium as well as the
hammer price, but not other charges - but it is the removal of
uncertainty in a world increasingly conscious of cashflow that Mr
Aquizerate's "boutique insurance" operation hopes to tap into.
He came up with the idea for the
company after running art galleries in Milan, St Moritz and Beverly
Hills for the past decade. "The company is funded through various
financial instruments (bank credit lines) and committed capital
from investors/collectors and myself," he told ATG.
As well as relying on valuations from
approved auction houses, including those selling the objects in
question, AAG aim to build an in-house database of analysis,
auction results and other statistics to make their risk assessment
more accurate.
The offer of guarantees is currently
limited to Old Master paintings and drawings, 19th century art and
decorative arts, Impressionist and Modern art, modern sculpture,
Chinese art and ceramics, Contemporary art, Design and 20th century
decorative arts pieces.
"We work with auction houses worldwide
(USA, Canada, China, Hong Kong, UK, France, The Netherlands,
Germany, etc) and we also intend to open offices to cater better to
the specific financial and legal environment of clients in London
and in Hong Kong," said Mr Aquizerate.
Close co-operation with auction houses
is likely to prove crucial in the matter of after-sales and
reoffers. Depending on auction houses' terms and conditions,
currently items can be offered immediately after the sale below the
reserve, or retained for resale sometimes for an indefinite
period.
AAG only pay out where they acquire
the item, so policyholders agreeing to after-sales below the
reserve to a third party would not be able to recover the
difference, while the fulfilment of the policy payment would appear
to deprive the auction house of a vendor's commission.
On the other hand, those consigning
works for auction can negotiate after-sale conditions and returns
in advance, allowing policyholders to regain unsold items in order
to submit claims to AAG.
"Clients interested in obtaining
auction guarantees from us are from all over the place, from the
USA and Canada to Europe, South America, Asia, Russia, and so
on.
"My objective is to 'revolutionise'
the way art is bought and sold in auction," said Mr Aquizerate. "On
the buyers' side, I hope in a few years clients will require a
'buyer's guarantee' from us and that will become a norm, a bit like
a warranty for a new car. Nobody would buy a new car without having
a warranty on it."
It's early days and there may be
significant challenges in making a business model like this work,
but AAG's idea of insuring the middle to higher end of the auction
process for both buyers and sellers is certainly one that a lot of
people will be watching very closely.
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