The Ivory Act will make it illegal to trade in most ivory antiques and works of art from sometime in mid-2019 in the UK.
Personally, I think the Act is rather divisive, badly thought out and based on some more than dubious statistics, but, leaving that aside, the natural outcome is that most ivory artefacts will become worthless from the inception of the Act. Why anyone thinks that banning the trade in 200-year-old works of art will stop ivory poachers in 2019 is beyond me.
Above all, this government has not made any provision for compensation to private individuals in the UK.
Nonetheless, there are some important issues for the insurance broking profession to consider.
I think insurance brokers have a duty to understand the Act and to advise their clients on the potential situation where they could be substantially over-insured, since, in the event of loss or destruction (or even damage), insurers will be unable to make a claim payment. This is on the basis that if you cannot buy or sell something, it has no value.
It will be a complex area to deal with, but the time to start thinking about it is now. If you don’t, your high net-worth clients will be taken by competitors who have the answers.
There is an exemption for items acquired under an insurance contract in force before section 1 comes into force - but how does that affect your clients? And, of course, a general insurance contract normally only lasts for 12 months.
Insurance brokers will not only need to understand when an ivory item or collection might become valueless, but also when a client’s ivory assets are exempt from the Act. The exemptions are: musical instruments with less than 20% ivory, antiques with less than 10% ivory, ivory miniatures, items of historical importance, trade between certain museums and so on.
They will also need to understand how the new law will apply to repair to damaged items.
Is there scope for quality insurance brokers to steal an edge over competitors by offering an advisory service to clients?
We will also have to consider that wealthy clients may be exporting vast and important collections to foreign homes. Insurance brokers will need to be alert to the shift in assets and the transport risks. I know of one owner of a fine collection of antique chess sets worth many millions who has simply packed them up and shifted them to Europe.
There will also be complications around the import and export of ivory under Brexit (if it happens) or Remain (if that happens).
I mentioned a commonly held opinion that the government has sought popularity rather than care in driving through this legislation. Already there appear to be markets in the Far East for rare items to have the old ivory removed in the UK and to be replaced by modern ivory when the item arrives at its new home. This means that rather than deterring the slaughter of elephants now, the government is inadvertently encouraging it!
From an insurance perspective, does this mean that partial ivory antiques with more than 10% ivory content might actually have a value? For example, a Chiparus figure might be worth £30,000 before the ban. There are plenty of them around, so they are not of exceptional historical interest and museums have plenty of examples. So, the owner has the ivory face and hands removed and has a 3D copy of them made. The item, plus the 3D copies, are sent to the new owner in Asia for a price of say £20,000. The new owner then has a new ivory carving made from the 3D copy and the item is now again complete.
The inheritance tax situation is also interesting in that if a big collection has no value then it can be passed on as a lifetime or gift on death without any tax. This has been sold as a benefit of the legislation, but the reality is that it is a massive loss of revenue to the country, primarily from the wealthy. Financial planners rather than insurance brokers will need to bear this feature in mind.
Also, there is the causation issue under liability cover, particularly for ivory items held in trust. On the face of it, whilst a trustee might be responsible for a loss or damage or might be responsible for insurance for loss or damage, if the subject of the responsibility is worthless then how can there be any damages against the trustee?
My initial thought is that to assume an item is valueless because it cannot be traded is premature and that it might be an insurance broker’s duty to understand how, by legal means, items of ivory or containing ivory might still have a financial value.
Ultimately, I am being provocative to prevent the insurance broking profession, and the insurance market generally, from putting their heads in the sand.
My guess is that the better insurers will get their heads around this soon and we would expect RWA clients to ask the question of the insurers and I am sure that lawyers will be having their way shortly.
Watch this space for more informed comment.
Don’t forget, it is not your duty to advise a client about an Act of Parliament (that is the duty of lawyers), but it is probably your duty to advise a client about the insurance implications.