Arrangement under which insurer and policyholder fix at inception the amount payable in the event of a total loss, with no fresh valuation at the time of the claim.
Agreed value is the central mechanism for insuring assets whose value cannot be objectively established, foremost among them artworks and collectibles. Rather than deferring valuation to the day of the loss, as classical indemnity insurance does, the parties agree in advance on an amount payable in the event of a total loss, without appraisal or dispute. Market wordings specify that this value is settled for the purposes of the contract only, with no representation as to the price the asset would attain if sold: agreed value is not a market truth but a convention, a number the parties choose to hold as true in order to be able to contract. It knowingly departs from the indemnity principle, since the insurer undertakes to pay the agreed amount even if the market value has fallen between inception and the loss; some contracts even pay beyond the itemised amount to track market appreciation. The counterpart of this certainty is heightened underwriting discipline, the insurer needing to ensure that the declared value is plausible, documented and regularly revalued, failing which the convention would become an instrument of over-insurance or moral hazard.
A collector insures a painting for an agreed value of 2 million euros. Three years later the work is destroyed in a fire, even though the artist's market has fallen 30 %. The insurer nonetheless pays the agreed 2 million, with no appraisal: the convention prevails over the market.
police en valeur agréée, agreed value policy, valeur conventionnelle