Secured warehouse with a suspensive tax status where artworks and valuables are stored, concentrating a major accumulation risk for insurers.
A freeport is a secured warehouse benefiting from a suspensive tax regime: goods stored there, notably artworks and valuables, incur neither customs duties nor taxes as long as they do not leave. Geneva, Luxembourg and Singapore host the best known. Designed to facilitate trade, freeports have become long-term storage venues where a considerable share of the world's artistic value sleeps, often out of sight of the public and the authorities. For insurance they pose two distinct problems. The first is an accumulation risk characteristic of the specie class: a single loss, fire or water damage, can simultaneously strike hundreds of works belonging to different policyholders, covered by separate policies but exposed to the same event. The second is a compliance issue, the opacity of these venues feeding growing concerns of money laundering and tax evasion that draw regulators' attention and increase the due-diligence obligations of insurers and intermediaries alike.
A single family of dealers is estimated to store several billion dollars of art at the Geneva freeport. For a specie insurer, a fire at such a site would be an accumulation scenario comparable to a natural catastrophe striking a concentrated property portfolio.
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