ZURICH/LONDON A metal door set into a mountain in Switzerland offers a way out for fine art investors forced to pay over the odds to insure their collections.
The doorway leads into a disused military bunker, one of several being sold off by the Swiss government and whose echoing, climate-controlled chambers, once used to stockpile munitions, are being put forward as ideal storage space for works of art.
The 57-year-old bunker near Lake Lucerne, marketed as a site to store valuables and on offer at 386,000 Swiss francs ($417,000), could relieve a huge concentration of costly paintings at the world's biggest fine art vault in Geneva, the storage option of choice for wealthy buyers worldwide.
That warehouse, prized for its high security and its location in Geneva's tax-exempt freeport zone, holds art worth about $100 billion and has space to accommodate more.
But insurance underwriters, fearing ruinous losses if the facility were hit by a fire or an art heist of the kind that struck Rotterdam's Kunsthal museum earlier this month, are raising the cost of insuring any more paintings under its roof, or even refusing cover altogether.
"If you are a prudent insurer you want to make certain that you know how much risk you are exposed to at a certain location," said Nick Brett, underwriting director at AXA Art Insurance, the world's biggest specialist art insurer.
"There's an awful lot of art in Geneva freeport, and as insurers we have to make sure we don't expose ourselves to just one place."
The cost of insuring paintings stored at the Geneva facility has doubled over the last three years, Brett estimates. Investors who stockpile art in an equally secure location without the same concentration of risk can expect to pay up to 50 percent less to insure it, according to Richard Nicholson, fine art specialist at insurance broker Willis.
The insurance impasse at Geneva, replicated at other specialist art vaults worldwide, comes as wealthy investors fleeing volatile stock and bond markets are putting money into paintings instead and need places to store them.
Soaring art sales have increased the volume of work in storage while also boosting its price, causing a build-up of value at the world's art vaults, and creating an unforeseen new risk factor for the insurance industry.
Art investors want new storage space to cut their insurance costs, and would use converted military bunkers provided they met the necessary security and climate control requirements, said Enrique Liberman, president of the New York-based Art Fund Association.
"It really depends what they do with the space rather than the space itself," he said. "If you expand the number of warehouses a lot of the risks inherent to storing art might be mitigated, because they won't be so overcrowded."
The danger of allowing a big accumulation of costly art in one place was underscored in 2004 by a London warehouse fire which destroyed work by Damien Hirst and Tracey Emin among others, costing insurers 20 million pounds ($30 million).
With turmoil in financial markets prolonging the art investment boom, art storage looks set to remain at a premium.
Art's growing appeal as an investment asset is illustrated by the emergence since the mid-2000s of professional fine art investment funds. There are about 45 such funds with combined assets of about $1 billion, and more are preparing to launch, according to the Art Fund Association's Liberman.
They have contributed to the global art market's recovery from a brief downturn after the 2008 banking crash, evidenced by the sale in May of a version of Munch's "The Scream" for a record $120 million.
Total sales through auction houses and dealers grew to an estimated $55 billion last year, not far off their pre-crisis peak of about $60 billion, Willis' Nicholson said.
Art storage firms have responded by building new facilities. The Geneva freeport unit is being extended, and a new freeport vault is due to open its doors in Luxembourg in 2014.
But disused bunkers in Switzerland, the epicentre of the art storage world thanks to the country's expertise in discreetly looking after the assets of the rich, offer a ready-made alternative that is already being exploited.
"People have been talking about this for some time," said Robert Read, fine art underwriter at Bermuda-based Hiscox, the world's second-biggest art insurer.
"It would make very suitable storage."
One firm that has successfully converted a military facility into storage space for art is Swiss Data Safe, based in the central Swiss town of Amsteg. Swiss Data Safe stockpiles paintings, bullion and computer data in an Alpine bunker originally intended as a refuge for the Swiss government in case of invasion or nuclear war.
The company declined to be interviewed.
The Tate, home to Britain's national art collection, keeps some of its paintings in a decommissioned missile storage unit in Hampshire, south-west of London, an art industry source said. The Tate declined to comment.
Missile bunkers can be adapted to hold paintings as they are climate-controlled and highly secure, the main requirements for art storage, according Paul Williamson, commercial director at London-based art logistics firm Constantine.
Buying and converting a bunker could also be cheaper than building a vault from scratch, which can cost between 15 million and 20 million pounds ($24-$32 million), Williamson said.
BUNKERS FOR SALE
There are many disused military facilities in Switzerland, heavily fortified during World War II against Nazi invasion.
More were built at the height of the cold war in the 1960s, when the country was committed to providing space in a nuclear fallout shelter for each resident.
But the collapse of the Soviet Union has led to a reassessment of defence priorities. To save money, many such sites were closed, and some are now up for sale.
Armasuisse, the government agency selling the bunker near lake Lucerne, declined to say how much interest it has received. The agency will review offers for the site after October 31.
Art insurance premiums amount to about $600 million annually. Big art claims have been rare, caused mainly by accidental damage to paintings during transport, or mishaps such as a 2006 incident in which casino owner Steve Wynn put his elbow through a Picasso he owned.
But the build-up of billions of dollars' worth of art in a handful of locations has brought a realisation that a single event could now easily wipe out a whole year's premiums.
"A plane crashing into one of the freeports - that would be where our catastrophes are," said Hiscox's Robert Read.
(Reporting by Myles Neligan in London and Catherine Bosley in Zurich; Editing by Giles Elgood)