Canadian Heritage Committee on June 6th, 2006

[Maka Kotto, Bloc, Saint-Lambert, QC]

I have some questions on your eligibility criteria. Under the program, an exhibition is eligible for indemnification only if the total value of the objects is greater than $500,000. Are there many exhibitions, especially in smaller communities, where the insurable value would be less than $500,000? If so, should this threshold not be reduced in order for them to be covered?

[Lyn Elliott Sherwood]

The program is aimed at major exhibitions where insurance costs can be enormous. As for small exhibitions, it might be more efficient to provide them with funding to access private insurance.

For a small institution that wants to organize a large exhibition, there is the issue of revenues. One must ask if it will reach a large enough public in order to break even. We are in a market economy.

As for the policy issue you raise, one must determine if it is more efficient to have an indemnification program or to set up another program that would provide funding to cover the costs of travelling exhibitions, including insurance costs.

[Maka Kotto, Bloc, Saint-Lambert, QC]

You mentioned the market. In view of...

[The Chair, Conservative, Gary Schellenberger]

Excuse me.

[Maka Kotto, Bloc, Saint-Lambert, QC]

I will follow up later if there is time left. Thank you.

[The Chair, Conservative, Gary Schellenberger]

The time is up.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I think it's a very wise program, because of the cost of insurance to run any kind of exhibit or festival. On any community activity that we're doing in the arts now, the cost of insurance is having major impacts.

In terms of the $450 million cap, I would like to ask you if, or how often, you have an exhibit that reaches or exceeds the cap. In that case, where would they go to cover the outstanding amounts above and beyond $450 million?

[Lyn Elliott Sherwood]

I'm going to answer the first big easy part of that question, then I'm going to ask my colleague Mr. Wickens, who is the manager of the program, to discuss where they go.

In the first five years, there were six exhibitions that exceeded $450 million. The cost of insurance to them was $8.5 million to cover the extra insurance, and they got that insurance from—

[Keith Wickens, Manager, Indemnification Program, Department of Canadian Heritage]

Again, it's a question of the liquidity of the insurance companies. Very few Canadian companies can cover vast amounts of money.

If we have an exhibition worth, say $800 million—and we've had at least two, if not three—then we're talking $350 million to $450 million. In most cases, that would go offshore to Lloyd's, Marsh, or Aon Artscope in Amsterdam. But the very large institutions—and they would be the ones having this—may be able to negotiate that with their own insurer here in Canada. But for the most part, they are restricted in doing that because of coverage for war and terrorism.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Poor old Edvard Munch's The Scream, has caused quite the stir since it was stolen. If, for example, we're running the art gallery in Ottawa and we want Guernica to be brought here, and the museum in New York agrees, how is the insurance dealt with? Does their local insurance, whether it's in the United States or Europe, cover part of the cost of a travelling exhibit such as that, and we'd cover the rest? Or do we take the whole risk?

[Lyn Elliott Sherwood]

Let me make sure I understand your question. Is indemnification a shared responsibility between governments?

[Charlie Angus, NDP, Timmins—James Bay, ON]

Yes.

[Lyn Elliott Sherwood]

No. There is some variation on the transit in and out of the country—as I told Keith earlier today, it was too much information, but I'm glad he gave it to me. We cover both in and out. On occasion, Britain has asked us if we have enough room to cover in and out, because if we don't, they'll pick up the homeward journey for indemnification. But by and large, the Canadian indemnification covers the full circuit of the exhibition.

If it is not too much information, I would ask Keith to talk about the point at which indemnification starts for an exhibit that's moving between many countries.

[Keith Wickens]

If I understood your question correctly, did you mean if it's coming from an institution in New York and loaned to Ottawa, does the institution owner in New York pay anything?

[Charlie Angus, NDP, Timmins—James Bay, ON]

Do they have to get any insurance?

[Keith Wickens]

No, they don't. They insure it on their own property, but that's no different, in a sense, from renting a car. Obviously they don't have to lend it, but if they do, their own bylaws insist that it's covered for its fair market value, so that when anything is borrowed, whether it's insured or indemnified, the borrower bears full responsibility.

When indemnification comes into effect, it is not a date, it's an actual signature that is on a condition report. This is vital because that condition report is the benchmark against which we are indemnifying. So for anything—a crack in a painting or a picture frame—a condition report is made by qualified conservators. In most cases, it is actually co-signed by the lender and the borrower. Those condition reports must be provided to the program, and indemnity goes on or off with them. Moreover, they're cumulative. Every time it's taken in or out of a crate, a new condition report has to be made, so we know where and when any damage occurred.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I'd like to go from the high end to the low end now.

[The Chair, Conservative, Gary Schellenberger]

One quick question, please, Mr. Angus.

[Charlie Angus, NDP, Timmins—James Bay, ON]

A quick question, yes.

Has there been thought of a similar program for exhibits valued less than $500,000? I'm considering issues in terms of regional values of art and museum pieces. There's such a limit on those budgets to be able to pay these costs. Obviously you couldn't use the same program, because you'd have to have such strict guidelines above $500,000. But from $150,000 or $250,000 to $500,000, would it be possible to have a similar program for regional museums and art galleries, etc?

[Lyn Elliott Sherwood]

The approach we currently have is that insurance costs are an eligible expenditure under the museums assistance program, and the self-funded insurance program, run by the Canadian Museums Association, would provide favourable rates for the institutions you are mentioning.

[The Chair, Conservative, Gary Schellenberger]

Thank you.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

I have a question first of all through you, Mr. Chair, to Ms. Sherwood.

Did I hear you say that there have been no claims yet under our program?

[Lyn Elliott Sherwood]

Yes, and I'd like to say it again: $7 billion worth of indemnification over five years and no claims.

[Ed Fast, Conservative, Abbotsford, BC]

That's wonderful. That's a great record to have.

Do we get involved in any reinsurance? Are there reinsurers that cover us on the back side, or this is a straight risk to the taxpayer?

[Lyn Elliott Sherwood]

We would not do that. If there is supplementary insurance to be purchased, the institution would be purchasing it, and if the primary insurer then goes to a reinsurer, that's their....

By and large, if someone is looking for all-risk coverage—and this goes to the heart of the issue of exclusion--what we won't cover.... If, for example, a foreign institution is insisting on coverage for acts of war, and we don't indemnify it, then that business would tend to go offshore to a company that would cover for acts of war. Generally it would be fairly expensive, but we don't deal with the insurance companies; that's the institutions.