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How the scheme works

The indemnity scheme is based on the principle of accessibility, that is it aims to give New Zealanders access to significant cultural exhibitions from overseas.

Under the scheme, the Government takes on a large part of the risk of presenting exhibitions. This minimises the amount of commercial insurance museums and galleries must buy. Government indemnity provides compensation for loss or damage that isn’t covered by commercial insurance.

Indemnity is granted by the Minister of Finance on the recommendation of the Minister of Arts, Culture and Heritage, under the Public Finance Act 1989. To be considered for indemnity under the scheme applicants need to meet certain criteria.

If you’re considering applying for indemnity, we recommend you plan a couple of years ahead and talk to us as soon as possible.

Recent Indemnities

  • Auckland Art Gallery – Light from Tate
  • Auckland War Memorial – Ancient Greeks
  • Te Papa – Surrealists
  • Wellington City Gallery – Hilma af Klint
  • Tairāwhiti Museum – Tū te Whaihanga.

Conditions and criteria

Touring exhibitions in New Zealand need to meet the following definitions and criteria to be eligible for government indemnity.

Definitions

  • The ‘applicant’ is the person or party applying for indemnity, such as museums and galleries.
  • The ‘lender’ is the lender of works to an exhibition.
  • The ‘Ministry’ is the Ministry for Culture and Heritage.
  • ‘Indemnify’ means providing financial compensation to an agreed value in the case of an actual loss.
  • ‘The Deed’ is the formal document that sets out the indemnity agreement between the applicant and the Government.

Funding criteria

Value of exhibition

Touring exhibitions must have a minimum value of NZ$2.5 million to be eligible for the scheme.

Number of venues

As the scheme is based on the principle of accessibility, the Government prefers to indemnify exhibitions that will be shown at two or more venues in New Zealand.

Location and content

The exhibition must be shown in New Zealand at a cultural institution. It must comprise cultural items from overseas and/or New Zealand collections. Note that a single artwork can be considered an exhibition.

Significance statement

The application must include a statement of the significance of the exhibition to New Zealand audiences, including its importance from an historical art perspective, if relevant. You may also want to consider in your statement whether the exhibition content (or similar content) is already available in New Zealand collections.

Administration charge

Include as much information as possible in your initial application to avoid being charged for the administrative costs associated with your application.

Limit of indemnity and risk

The exhibition needs to travel in consignments worth no more than $50 million. If the value of an individual item exceeds $50 million, Cabinet will need to give its approval for this exception to the limit. Any other exceptions to the consignment limit must be negotiated with us and will also need Cabinet approval.

Level of risk

The Government indemnifies the exhibition’s full value but also assesses the exhibition’s risk level, which is the maximum probable call on the indemnity. The risk is assessed based on the exhibition’s single highest value consignment, or, where transit doesn’t need to be indemnified, the value of the most valuable single item. The total amount of risk that the Government will indemnify for a single exhibition is $150 million.

Concurrent exhibitions

Concurrent exhibitions can be fully indemnified if the total risk to the Government is less than $150 million.

For example:

  • An exhibition has a total value of $160 million and travels in four consignments valued at $50 million, $45 million, $35 million, and $30 million. The risk of loss assessment for this exhibition is $50 million, even though it is indemnified to its full value.
  • A concurrent exhibition has a total value of $225 million and travels in five consignments valued at $45 million each. The risk of loss for this exhibition would be assessed at $45 million, with full indemnity for the exhibition.
  • The combined risk of the two exhibitions is $95 million, which is still below the $150 million risk limit the Government will carry.

Commercial insurance (first risk)

Applicants must take out first risk insurance with a commercial insurance company for the duration of the indemnity. The amount of insurance depends on the total value of the exhibition. See table 1 below.

First risk insures the exhibition against the risk of reparable damage, irreparable damage, and loss or destruction up to the specified amount. It provides cover up to the determined amount for a single event as well as for multiple accidents, each up to the determined amount.

 

Table 1: Level of first risk insurance required by value of exhibition

Exhibition value NZ $First risk insurance NZ $
2,500,000 - 24,999,99950,000
25,000,000 - 49,999,99990,000
50,000,000 - 74,999,999130,000
75,000,000 - 99,999,999170,000
100,000,000 - 124,999,999210,000
125,000,000- 149,999,999250,000
150,000,000- 174,999,999290,000
175,000,000 -199,999,999330,000
200,000,000 - 224,999,999370,000
225,000,000 - 249,999,999410,000
250,000,000 - 274,999,999450,000
275,000,000 +500,000

Top-up on consignments

Commercial top-up insurance may be needed for transit periods if the value of a consignment exceeds $50 million.

Budget and report

You need to submit a draft exhibition budget showing income streams and expenditure with your application.

At the close of the exhibition, you will need to report against this budget – or a revised one if you submit an updated budget – as part of your exhibition report.

Security

You will need the exhibition lender to prepare a written assessment of any factors they believe are relevant to the security of the items lent. You must provide copies of this written assessment to the Ministry and the New Zealand Police.

You should liaise directly with local police around security and travel arrangements and provide us with evidence you have done this.

Confidentiality

From the outset of negotiations between you and the lender, you cannot make public the values of the individual items in the exhibition and the values, or approximate values, of all or any group of the items at any time. This information must be kept confidential to the lenders, the applicant, and the Government.

You must keep transport schedules confidential, with no publicity given to the transit, arrival, or departure of any exhibition items.

Transit – schedules and values

You need to supply the transport schedules, and any variation to them, to us along with the value of each consignment in both the lender’s currency and New Zealand dollars, with the exchange rate stated.

Environmental conditions

The loan agreement and/or exhibition contract between you and the lender may stipulate special environmental conditions that may be referred to in the indemnity Deed. In the unlikely event that we are not satisfied with the conditions specified, we may require you to meet extra conditions. These will be outlined in the Deed.

Valuations

You need to be able to show us that valuations are realistic using recent sales catalogues or other standard references. If you aren’t sure of the true market value, you’ll need to arrange for an independent confirmation of this.

The valuations should be in the currency the lender specifies. The consignment values and the total value should be in New Zealand dollars, with the exchange rate stated, as well as in the lender’s currency.

Valuations for items from overseas collections should exclude GST. Valuations for items from New Zealand collections should include GST.

Publicity

As the New Zealand Government is effectively a major sponsor by providing indemnification, you should fully acknowledge this in all publicity for the exhibition. Unless you and the Ministry agree otherwise, the credit will read: ’Indemnified by the New Zealand Government.’

Contact us to obtain logo files for publicity purposes.

Condition reporting

Condition reporting is a vital part of the indemnity agreement and attests to the condition of each exhibition item. Unless you negotiate otherwise, the period of indemnity for each item will begin as soon as the first condition report is completed by a senior conservator acting for the lender. This initial report must be completed immediately before packing the item. You must complete condition reports at each stage throughout the exhibition tour, on arrival at each venue and before dispatch.

Similarly, unless negotiated otherwise, the period of indemnity will end when the item has been unpacked and examined by a senior conservator acting for the lender.  This examination will happen when the item returns or when it arrives at a third country for further exhibition. The conservator must immediately let you know of the item’s condition in writing and then you must let us know.

Incidents – damage or loss

You must report any loss, damage, or deterioration to the indemnified items during the period of indemnity to the lender(s) and us within 24 hours, and regardless of whether the loss is sufficient to warrant a claim.

No conservation work is to be done without the lender’s consent unless in an extreme emergency. In this case, the conservation work is to be no more than is necessary to halt the damage or deterioration.

Indemnity

Where your liability to the lender(s) exceeds the amount of first risk insurance cover, the Government covers the liability above the first risk cover. If you intend to claim on the indemnity, you need to advise the Government as soon as the need to call on the indemnity becomes apparent.

If reparable damage happens that exceeds the first risk cover, the Government will cover the cost of conservation. If the damage is irreparable, or if conservation will reduce the item’s value, the reduced value will be settled by negotiation between you, the lender, and the Government.

The procedure for resolving disagreements between parties on these issues is set out in the model deed of indemnity. It involves arbitration subject to the provisions of the Arbitration Act 1996 within New Zealand’s jurisdiction.

Payments

The Government will pay you and then you, who must promptly pay the lender. Should the item be lost or destroyed, the Government will pay to the level outlined in the Deed, in the lender’s currency. The amount paid will reflect the exchange rate at the time of payment, rather than at the time the indemnity was granted.

You shall return any item that is lost or stolen and later recovered to the lender at your expense. The lender shall pay you any compensation it receives under the indemnity, less any amount it may be entitled to for damage. You then need to repay the Government for any payments made under the indemnity.

If the Government makes a payment under the indemnity it can act in your place, or in place of the lender, in any legal claim against a third party that contributed to the damage or loss.

Breaches of conditions

We will investigate any breaches of the terms of the indemnity Deed and inform the Minister for Arts, Culture and Heritage and the Minister of Finance of these breaches.

If you are in breach of your obligations under the Deed and the breach causes or contributes to damage, loss or destruction, you shall reimburse the Government any sum it has paid under the indemnity. Any dispute between you and the Government shall be referred to arbitration.

Notification in Parliament

Following the signing of the Deed, the Government’s indemnity is formally tabled in Parliament, although the dollar amount is not stated.

Competing applications

If we receive two or more applications with a combined risk value of more than the $150 million limit, we will try to arrive at an outcome acceptable to all applicants. For this reason, it’s a good idea to let us know early if you are thinking of applying for indemnity. 

Extension of indemnity period

You can ask for an extension of the indemnity period if opportunities arise to extend the exhibition either at the scheduled venue or other venues. The viability of an extension depends on whether the $150 million limit of available indemnity risk has been ‘used up’ by other touring exhibitions during the proposed extension period.

As with applications, extensions must be approved by the Minister for Arts, Culture and Heritage. They make a recommendation to the Minister of Finance, who makes the final decision.

The Deed is then amended, signed by the Minister of Finance and your representative, and tabled in Parliament. Negotiating an extension is a detailed process and incurs administrative costs, so it’s preferable to finalise your touring schedule at the outset.

Institutional details

If you haven’t applied for indemnity before, or if we need more information, you may need to supply details about your institution including your organisational structure, financial situation, environmental conditions, and security measures, as well as any insurance claims relating to exhibition items you have made in the last three years.

We may ask you for additional information about the exhibition at any stage.

How to apply

This is the application process for museums, art galleries and similar organisations to apply to the New Zealand Government to indemnify a touring exhibition they are hosting.

1. Preliminary negotiations

If you’re considering applying for government indemnity, contact us early.  We prefer up to two years notice of potential applications, as there are often competing claims for indemnity in any given period.

When you start negotiating with the lender of works for an exhibition, make sure the lender is familiar with the model indemnity Deed. This is the formal document between the New Zealand Government and the applicant that sets out the conditions of the indemnity.

Loan agreement negotiations

When negotiating loan agreement(s) with lender(s), you must ensure each agreement includes the following clauses:

  • The Lender shall give notice in writing to the Museum and to the Chief Executive of the New Zealand Ministry for Culture and Heritage of the Lender’s intention to make any claim for compensation in respect of the damage, loss, or destruction of any item within one calendar month of the damage, loss, or destruction being discovered or ascertained.
  • The Lender shall lodge such claim within three calendar months of the damage, loss or destruction being discovered or ascertained.
  • The Museum shall not be liable with respect to any loss or destruction caused by the Lender of the item in question.
  • If any of the items are lost or stolen and subsequently recovered, they shall be returned to the Lender by the Museum at its sole expense. The Lender shall then refund to the Museum any compensation it has been paid, less any amount the Lender may be entitled to in respect of damage to the items as agreed between the Lender and the Museum.
  • If the Crown is required to indemnify the Lender in respect of any claiming rising out of the loan agreement, the Crown shall have the right to be subrogated for the Lender in respect of any claim against a third party.
  • Any dispute between the Lender and the Museum in respect of subclause (e) shall be referred to arbitration under the New Zealand Arbitration Act 1996 or any Act passed in amendment or substitution for it.

If you have any difficulty in including these clauses into the loan agreement(s) you need to let us know as soon as possible.

You may wish to seek legal advice to ensure you don’t unwittingly put yourself at risk by signing a loan agreement that won’t be covered by indemnity.

2. The application

Send a formal application to us at least six months before the start of the exhibition. Your application should include: 

  • the exhibition title
  • the list of items in the exhibition including the titles, or descriptive titles, media, and sizes. List the items’ individual values in the home currency, and the exhibition’s total value in NZ dollars with the exchange rate stated
  • the probable value of consignments in the home currency and in NZ dollars with the exchange rate stated
  • advice of any single item valued at over NZ$50 million
  • the period for which you seek indemnity (that is clarifying the condition reports at which indemnity starts and ends)
  • the schedule of New Zealand venues with approximate dates
  • the exhibition budget
  • a statement of the exhibition’s significance.

3. Granting approval

We prepare a report about your application for the Minister for Arts, Culture and Heritage. If the Minister endorses the application they make a recommendation to the Minister of Finance for approval, subject to the negotiation of the Deed.

The Minister of Finance then receives advice from Treasury officials (who may ask you for additional information), and decides whether to grant the indemnity, subject to the negotiation of the Deed. This process can take a few weeks.

Negotiating the Deed

The model deed is the basis of the Deed of indemnity. The Deed can be prepared by you or by us. The details of each Deed will be specific to the exhibition, and we may need to negotiate with you aspects of the Deed such as:

  • period of the indemnity relative to the cover that other countries are providing for an international touring exhibition
  • value of the consignments
  • dispute resolution procedures with the lender(s)
  • verification of valuations.

You must also confirm the loan agreement(s) include the six clauses referred to above in ‘loan agreement negotiations.’

Negotiating the details can take time. We recommend you have as much information as possible finalised when you apply.

4. Executing the Deed

Following the negotiations, you need to provide us with the following documents at least four weeks before the start of the indemnity period:

  • loan agreement(s) for indemnified items
  • confirmation of valuations
  • evidence of first risk insurance
  • details of transport schedules and consignment values in the lender’s currency and NZ dollars with the exchange rate stated
  • lender’s assessment of any factors relevant to security
  • evidence that the New Zealand Police (local branch or national headquarters depending on consignment values) has approved the security and travel arrangements
  • confirmation of government acknowledgement in proposed publicity.

Two copies of the Deed, setting out the conditions under which indemnity is granted, are drafted, and signed by you and the Minister of Finance.

It is very important you supply all Deed documents required, as otherwise you risk being in breach of your obligations under the Deed and not covered by government indemnity.

5. Ongoing obligations

You must report to us on the progress of the exhibition, both at the time of arrival and throughout its tour. You must also confirm to us in writing that the items have been returned to the lender at the end of the indemnification period.

You must immediately report to us any instance of loss, damage or deterioration as detailed above in ‘Conditions and criteria.’

We also need you to submit a report within two months of the end of the indemnification period, covering:

  • attendance numbers at each venue
  • demographic information relating to attendance – the type of detail supplied will depend on the exhibition’s circumstances
  • final exhibition budget.

Also send to us copies of media clippings, posters, flyers, catalogues, or other promotional material you have not previously supplied.

More information

For more information about the Government indemnity scheme contact:

Te Pae Māpuna
Ministry for Culture and Heritage
PO Box 5364
Wellington 6140

Ph (04) 499-4229

E-mail [email protected]