Trump Budget Threatens Loan Exhibitions

Donald Trump's budget would cut one of the most cost-effective government programs: The Arts and Artifacts Indemnity Program. It's administered by the National Endowment for the Arts and would presumably go away if the that agency does. The Indemnity Program offers liability insurance for American museums organizing loan exhibitions. It applies to artifacts from overseas (the program basically started with King Tut in the 1970s) but also to artworks lent by American Museums (Grant Wood's American Gothic was covered when lent by the Chicago Art Institute to the Des Moines Art Center).
The possible loss of the Indemnity Program isn't getting much attention, and there are valid political reasons for that. We're a populist nation with a would-be populist President. It's easier to talk about Sesame Street and art classes for rural seniors than it is about loans of art and the scholarly catalogs accompanying them. But as a blog about the experience of visiting museums, it's worth pointing out how important the little-known Indemnity Program is.
In recent years artworks have become fantastically expensive. This applies not just to "priceless" antiquities but to the work of many living American artists. Museums need to insure against loss in order secure loans, and private insurance companies charge sky-high premiums. Just as it's hard for museums to raise money to pay the light bill, it's hard to convince philanthropists to pay for an insurance premium.
That's where the Indemnity Program comes in. It provides an indemnity for possible losses, backed by the faith and credit of the U.S. Treasury. The Indemnity can be large, up to $1.8 billion for a single exhibition. (Many shows now brush up against that limit.) It's not a rubber stamp. The indemnity Program vets each artwork by its importance, condition, and the security protocols. Works that aren't judged worth the risk are rejected.
It's estimated that Indemnity Program loans save museums $300 million in private insurance premiums a year (assuming the museums were able to pay that, which they aren't). In the 40 years the program has been in effect, there have only been three losses. Two minor paintings were stolen en route to a lender in Israel, and a Jean Arp sculpture was damaged and had to be restored. The total cost was $104,700.
What about the free market? If the losses have been that small, why don't private insurers lower their rates? A big part of the answer is that private insurers have to limit their exposure. They prefer to take lots of little risks rather than a few big (or correlated) ones. Chubb, which insures some of the art at TEFAF Maastricht, was sold for $28 billion in 2015. But only a tiny slice of that is the art insurance operation. Chubb's art division would be in no position to risk a billion-dollar claim. They might be willing to insure one van Gogh loan a year, for 40 years… but not an exhibition that places 40 van Goghs together at once, potentially subject to the same set of risks.
In short, there are some things government is better able to do than private firms are. Insuring museum exhibitions is one of them.