Insuring Entrepreneurial Risks

Insuring
Entrepreneurial
Risks

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Insurance products to cover entrepreneurial risks in the art market

The art market has developed into a globally networked economic sector. At the same time, new risks have emerged. Some risks can be avoided by careful action and mindful conduct, others are unpredictable. Risks that cannot be largely averted by acting wisely and prudently are a potential threat to your very existence.

Players in the art market are well advised to take precautions against risks by taking out specialist insurance solutions. The focus is on possible claims for damages from customers and business partners that may develop from day-to-day business, as well as financial losses that affect one’s own company.

In order for the insurance cover to take effect in the event of a claim, sector-specific insurance solutions are necessary that respond precisely to the activities and risks of companies in the art market.

Errors and omissions insurance

Errors and omissions insurance protects against the financial consequences of claims for damages made by third parties due to a breach of the obligation to exercise diligence during professional activity.

Valuations, statements on authenticity, attribution, age and state of preservation of art can lead to claims for damages from clients and customers if they turn out to be incorrect.

The trade in art is essentially based on trust and the existence of specific expertise. If statements about works of art turn out to be false, trust placed by art buyers and art sellers may be impaired permanently.

Errors and omissions insurance can help to give structure to a situation, where it is a question of clarifying whether an artist’s estate, an art appraiser, art dealer, gallery owner or auction house was mistaken in their judgement about attribution, authenticity, condition and value. The insurance can absorb the financial loss that may have arisen as a result of the breach of the duty of care.

Fidelity insurance

It is also important to protect one’s own company against financial losses that can develop from fraud scenarios, breach of business secrets, cybercrime, hacker damage and targeted data theft through intrusion in the IT system.

This can involve deliberate unauthorised actions by employees that result in financial loss to the company. Also, fraudulent acts by third parties increasingly lead to financial damage for businesses.

D&O insurance

With the progressing tightening and differentiation of legislation on compliance issues, the risks of personal liability and claims against managing directors and board members are on the rise. Irrespective of the legal structure and depending on the circumstances, managing directors and board members are personally liable without limitation for wrong decisions.

However, persons insured within the framework of D&O insurance do not only include the executive board and shareholders. Employees are also held covered if a claim for damages is made against them in their capacity as officer for compliance, data protection, money laundering and security.

D&O insurance protects business as well as private assets of the insured persons. Breaches of duty can quickly result in financial losses of several million euros. Errors and ommissions in business management cannot be avoided entirely. D&O insurance helps to maintain a working environment which allows for decisions to be made.

Cyber insurance

Strict data protection regulations, remote working with external devices and access to corporate networks and databases in a cloud environment while out and about, as well as the spread of web-based communication and transactions, increase the risks of manipulation and theft of valuable and sensitive business data.

It is not just the cost of recovering and restoring data that is in the focus here. The art market thrives on reputation and trust. A loss of control is therefore all the more damaging.

Cyber-attacks go hand in hand with …

Costs for data recovery, sometimes also extortion money

Liability risks and contractual penalties as well as fines for breaches of data protection regulations

Loss of reputation, loss of customer confidence

Risks to business continuity

Cyber insurance covers costs and recovery in the event of alteration, damage, destruction, erasure, encryption, copying or loss of data as a result of, among other things:

network security breach

(hacker-)attacks — targeted and untargeted — on the IT system of the insured

intrusion into the IT system of the insured, for example through phishing, i.e. the acquiring of personal data such as passwords, credit card numbers or similar with forged e-mails or websites

malware such as viruses, worms, or Trojans, which spread in the IT system of the insured and encrypt and destroy data, up to and including complete denial of service of the IT system

denial-of-service attacks that interrupt the operation of an insured’s IT system and render it inoperable

any transfer of malware to a third party’s IT system originating from an insured’s IT system

an operating error

a data breach / infringement of statutory and contractual data protection provisions and of confidentiality obligations (cyber liability in the event of third-party damage)

a cyber extortion

costs for maintaining business operations after a cyber-attack and during IT system recovery

theft of mobile devices on which customer and business data are stored

In addition to immediate measures to end a damage scenario, insurance also covers follow-up and advisory procedures after the occurrence of a loss.