Filled with oil paintings, watercolors, and other artworks, the offices of Privilege Underwriters Reciprocal Exchange (PURE) in White Plains, N.Y., look like a Manhattan gallery—that’s been through a storm. “We have a water-stained Salvador Dali, we have an ancient Chinese plate that is cracked and reframed in a box,” says Ross Buchmueller, the insurer’s chief executive officer. “And obviously we have this glass structure that greets everybody when they come in,” he adds, referring to a 5-foot sculpture with a crack in it that the company got from a client after paying his claim for its full value. “We have now installed damaged art throughout the building,” Buchmueller says. “It’s a constant reminder for why we are in business.”
PURE specializes in insuring the mansions of the ultrarich and their contents, a niche that is expanding rapidly as the ranks of U.S. billionaires swell. The company has about 50,000 policyholders; revenue from premiums has climbed 40 percent or more annually since its founding in 2006 and will come close to $500 million this year. Almost all its policyholders buy homeowners insurance, more than 80 percent also buy excess liability coverage, and about 75 percent pay extra to insure collections of art, wine, and other items. The business isn’t only about possessions: This year, PURE formed a partnership with Concentric Advisors, a cybersecurity firm run by a former Scotland Yard official, to help protect policyholders from hackers, identity theft, and breaches of financial data and embarrassing information.
Insuring emblems of wealth is a $40 billion business, says Evan Greenberg, CEO of Ace, the industry leader in the U.S. The overall property and casualty business generates almost $600 billion in annual premiums. Still, insurers like the luxury business because few collectibles are ever stolen or damaged and clients are willing to pay a lot to protect them, a combination that keeps profit margins high. Policyholders also take very good care of their prized possessions, says Buchmueller, who helped launch AIG’s private client group before leaving to start PURE.
The market keeps getting bigger. The wealth of the richest people in North America is expected to balloon to $62.5 trillion in 2019, from $50.8 trillion last year, says Boston Consulting Group. Next year the top 1 percent will hold more than half of the world’s wealth, according to Oxfam International. “The 1 Percenters have done pretty well in life, and they have a lot of toys to insure,” says Cliff Gallant, an analyst at Nomura Holdings who covers the insurance industry.
Although premium levels vary, PURE says insuring fine art valued at $1 million might cost $1,000 a year, and covering the same amount of jewelry might run about $8,000, because the jewelry is more likely to be lost or stolen. AIG has begun insuring clothing, shoes, and handbags, charging about $5,000 a year to cover clothing valued at $1 million. “We see everything from traditional art to the world’s largest collection of shrunken heads,” says Jerry Hourihan, who runs AIG’s private client business. The latter is hard to value, he adds, “because you can’t find a new collection of shrunken heads.” He declined to provide details to protect the owner’s privacy.
Ace’s July agreement to buy Chubb for $28.3 billion will triple Ace’s high-net-worth annual premiums to $4.6 billion, giving it 12 percent of the U.S. market, according to Bloomberg Intelligence. AIG’s private client unit took in about $1.5 billion this year in premiums and insures about 40 percent of billionaires in the U.S., Hourihan says. PURE plans to focus on the U.S. AIG and Ace are targeting places such as Dubai, China, and India. Cincinnati Financial and Nationwide Mutual Insurance also have announced plans to boost offerings for the wealthy.
At AIG, Buchmueller helped secure a contract with a firefighting team in California, allowing the company to offer a private emergency crew to deploy in neighborhoods prone to wildfires. Wealthier clients “like to build homes where the wind blows, where there are wildfires, where the earth shakes,” says Kelley Beach of insurance broker Marsh & McLennan.
AIG also has a former America’s Cup sailor on staff to advise yacht owners. When a 65-foot Viking Sportfish valued at $2.5 million was stolen from a Palm Beach (Fla.) marina in 2010, it took only a few hours to retrieve the boat. The search was helped by AIG’s connections with authorities and filling stations along the coast and in the Caribbean. The insurer hired a plane to search for the yellow-hulled ship and had a legal team on the ground to obtain warrants to secure it.
Donald Kirson buys insurance from PURE for the six-figure collection of duck decoys he keeps at his farm in Glyndon, Md. Kirson, who retired after selling his medical equipment business in 1998, has been buying decoys for about 12 years, traveling the U.S. to find them. He’s never had one stolen, and the wooden carvings rarely break. He lends out pieces only to local museums so he doesn’t have to ship them.
Most recently, Kirson spent about $175,000 to buy a piece carved in 1880 in Cobb Island, Va.—a rare item because the region was devastated by a hurricane in 1902, he says. “It’s got movement, it looks real, it just talks to you,” he says. “Beautiful form, old paint. It’s got shot marks in it because it was hunted over. It’s everything you would want in a decoy.” That kind of passion makes for ideal policyholders, Buchmueller says: “From an insurer’s perspective, you can only dream of people who care that much.”
The bottom line: PURE’s business covering homes and possessions of the ultrarich has been growing at least 40 percent a year since 2006.