Government indemnity of touring exhibitions

We administer the government indemnity scheme for touring exhibitions, which helps reduce the costs of insurance for international exhibitions visiting New Zealand. The scheme is based on the principle of accessibility - making significant touring cultural exhibitions available to New Zealanders.

Under the scheme, the government assumes a large part of the risk of presenting exhibitions, minimising the amount of commercial insurance museums and galleries need to 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.

Government Indemnity of Touring Exhibitions (PDF 50 KB)

Conditions and criteria

To be considered for indemnity under the scheme applicants need to meet certain criteria.

How to apply

If you’re thinking of applying for indemnity it pays to plan a couple of years ahead. The best thing is to talk to us as soon as possible.

Contact us

For more information about the government indemnity scheme contact:

Te Pae Māpuna
Ministry for Culture and Heritage
PO Box 5364
Wellington 6140
Tel (04) 499-4229
Fax (04) 499-4490
E-mail [email protected]

Government indemnity conditions and criteria

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

Definitions

The ‘applicant’ refers to the person or party applying for indemnity, such as museums and galleries. The ‘lender’ refers to the lender of works to an exhibition, and the ‘Ministry’ refers to the Ministry for Culture and Heritage.

Indemnify’ means providing financial compensation to an agreed value in the case of an actual loss.

‘The Deed’ means the formal document that sets out the indemnity agreement between the applicant and the government.

Conditions

Funding criteria
Administration charge
Consignment value – limit of indemnity
Concurrent exhibitions
Commercial insurance
Budget and report
Security
Confidentiality
Transit – schedules and values
Environmental conditions
Valuations
Publicity
Condition reporting
Incidents – damage or loss
Indemnity
Breaches of conditions
Notification in Parliament
Competing applications
Extension period
Institutional details
Providing information

Funding criteria

Touring exhibitions need a minimum value of NZ$ 2.5 million to be eligible for the scheme. As it’s based on the principle of accessibility, the government prefers indemnified exhibitions to be shown at two or more venues in New Zealand but will also consider those that will only be shown at one.

The exhibition is to be shown in New Zealand at a cultural institution and is to comprise cultural property from overseas and/or New Zealand collections. A single artwork can be considered an exhibition.

The application needs to include a statement of the significance of the exhibition to New Zealand audiences. This may well emphasise the art historical significance of the exhibition. You may also want to consider the availability of this type of material, or complementary material, in New Zealand collections.

Administration charge

Applicants may be charged for the administrative costs associated with an application. To reduce these costs, please supply as much information as possible at the outset.

Consignment value - limit of indemnity

The exhibition is to travel in consignments worth no more than $50 million. If the value of an individual item exceeds $50 million, this will need to be approved by Cabinet. Any other exceptions to the consignment limit must be negotiated with the Ministry and will need Cabinet approval.

The government indemnifies the full value of the exhibition, but also assesses the level of risk associated with each exhibition. The level of risk is not the same as the total value of the exhibition - the risk is the maximum probable call on the indemnity.

Government assesses the risk as the exhibition's single highest value consignment, or, in cases where transit doesn’t need to be indemnified, the value of the single item with the highest value. The total amount of risk that will be indemnified at any one time is $150 million.

Concurrent exhibitions

Concurrent exhibitions can be fully indemnified as long as the total risk is less than $150 million. For example, an exhibition may have a total value of $160 million and travel in four consignments valued at $50, $45, $35 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 may have a total value of $225 million and travel in five consignments of $45 million each. The risk of loss would be assessed at $45 million, with full indemnity for the exhibition.

The combined risk of the two exhibitions in this example is $95 million - 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 below.

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

Exhibition value NZ $	First risk insurance NZ $
2,500,000 - 24,999,999	50,000
25,000,000 - 49,999,999	90,000
50,000,000 - 74,999,999	130,000
75,000,000 - 99,999,999	170,000
100,000,000 - 124,999,999	210,000
125,000,000- 149,999,999	250,000
150,000,000- 174,999,999	290,000
175,000,000 -199,999,999	330,000
200,000,000 - 224,999,999	370,000
225,000,000 - 249,999,999	410,000
250,000,000 - 274,999,999	450,000
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

Applicants need to submit a draft exhibition budget showing income streams and expenditure. You will be required to report against this budget - or a revised one if you submit an updated budget - at the close of the exhibition as part of your exhibition report.

Security

Applicants will need a written assessment from the exhibition lender of any factors they believe are relevant to the security of the items leant. Copies of this must be given to the Ministry and the New Zealand Police.

You’ll need to liaise directly with local police around security and travel arrangements. Each consignment needs to be accompanied by an experienced courier. The police may also ask that a police or security escort accompanies consignments being transported by road within New Zealand.

Consignments valued at more than $15 million will need a security escort, which can be organised through Police National Headquarters.

You will need to be able to show the Ministry that the Police have approved the transit and exhibition arrangements.

Confidentiality

From the outset of negotiations between the applicant and the lender(s), the values of the individual items and the values, or approximate values, of all or any group of the items cannot be made public. This information must be kept confidential to the lenders, the applicant and the government.

Transport schedules must also remain confidential with no publicity given to the transit, arrival or departure of any exhibition items.

Transit - schedules and values

The transport schedules and any variation to them are to be supplied to the Ministry 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/exhibition contract between the lender and applicant may stipulate special environmental conditions that may be referred to in the indemnity Deed. In the unlikely event that the Ministry isn’t satisfied with the conditions specified, they may require that further conditions are met, which will be outlined in the Deed.

Valuations

Applicants need to be able to confirm that valuations are reasonable in the light of recent sales catalogues or other standard references. You’ll need to arrange for an independent confirmation of the valuations if you aren’t sure of the value, to ensure items are indemnified for their true market value.

The valuation of each item should be in the currency specified by the lender. 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.

As the New Zealand government is effectively a major sponsor by providing indemnification, this should be fully acknowledged in all publicity. Unless the applicant and the Ministry agree otherwise the credit will read:

Indemnified by the New Zealand Government.

Logos are available from the Ministry.

Condition reporting

Indemnity generally covers the items 'nail to nail' - for all transit and exhibition periods. Condition reporting is a vital part of the indemnity agreement. Unless negotiated otherwise, the period of indemnity for each item will begin on completion of the first condition report by a senior conservator acting for the lender. This shall be completed immediately before packaging. Throughout the exhibition tour, condition reports must be completed at each stage, 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 nominated by the lender on its return, or on arrival at a third country for further exhibition. That conservator must immediately inform the applicant of the item's condition in writing. The applicant must then inform the Ministry.

Incidents - damage or loss

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

No conservation work is to be undertaken without the consent of the lender 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 the applicant's liability to the lender(s) exceeds the amount of first risk insurance cover, the government covers the liability above the first risk cover. If the applicant intends to claim on the indemnity, they 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 result in a reduced value for the item, the reduced value will be settled by negotiation between the applicant, 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

Payments will be made by the government to the applicant, who must then 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.

An item that is lost or stolen and subsequently recovered shall be returned to the lender by the applicant at the applicant's expense. The lender shall repay to the applicant any compensation it has received under the indemnity, less any amount it may be entitled to for damage. The applicant shall in turn repay the government for any payments made under the indemnity.

If the government makes a payment under the indemnity it is entitled to act in place of the applicant or the lender in any legal claim against a third party that contributed to the damage or loss.

Breaches of conditions

Any breaches of the terms of the Deed will be investigated by the Ministry and will be brought to the attention of the Minister for Arts, Culture and Heritage and the Minister of Finance.

If the applicant is in breach of its obligations under the Deed and the breach causes or contributes to damage, loss or destruction, the applicant shall reimburse the government any sum paid by the government under the indemnity. Any dispute between the government and the applicant 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 stipulated. The indemnification will appear as a contingent liability on the Crown's financial statements.

Competing applications

If the Ministry receives two or more applications with a combined risk value of more than the $150 million limit, the Ministry will try to arrive at an outcome that is satisfactory to all parties. For this reason it’s a good idea to notify the Ministry early if you are thinking of applying for indemnity.

Extension period

Applicants may request an extension of the indemnity period if opportunities for further exhibition arise at a scheduled venue or at further venues. The viability of an extension depends first of all on the availability of the indemnity limit. The balance of the $150 million of available risk must not have been 'used up' by other touring exhibitions during the proposed extension period.

Extensions are processed in a similar way to the original application. The Minister for Arts, Culture and Heritage approves extensions and makes recommendation to the Minister of Finance, who makes the final decision.

An amendment to the Deed must be negotiated and drawn up, signed by the Minister of Finance and the applicant's representative, and tabled in Parliament. Negotiating an extension is an elaborate process and incurs further administrative costs, so it’s preferable to have the touring schedule finalised at the outset.

Institutional details

If an applicant hasn’t previously applied for indemnity, or if the Ministry requires further information, the applicant may need to supply institutional details including the organisational structure, financial situation, environmental conditions and security measures. They may also be asked to supply details of any insurance claims relating to exhibition items that have been made in the last three years.

Providing information

The Ministry may request additional information about the exhibition from the applicant at any stage.

How to apply to the government indemnity scheme

Here museums outside New Zealand will find all they need to know about applying for government indemnity for touring exhibitions.

Preliminary negotiations
Loan agreement negotiations
The application
Granting approval
Negotiating the Deed
Executing the Deed
Ongoing obligations

Preliminary negotiations

If you’re thinking about applying for government indemnity, contact the Ministry for Culture and Heritage sooner rather than later. The Ministry appreciates up to two years notice of likely applications, as there may be competing claims for indemnity in any given period.

From the start of an applicant’s negotiations with the lender of works for an exhibition, it is in their interests to ensure the lender is familiar with the model indemnity deed. The Deed is the formal document between the government and the applicant that sets out the conditions of the indemnity.

Model Indemnity Agreement (PDF 103 KB)

Loan agreement negotiations

When negotiating loan agreement(s) with lender(s), applicants must ensure that each agreement incorporates the following clauses:

The Lender shall give written notice 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 there is any difficulty in incorporating these clauses into the loan agreement(s) the applicant must notify the Ministry as early as possible.

The applicant may wish to seek legal advice to ensure it doesn’t unwittingly put itself at risk by signing a loan agreement that won’t be covered by indemnity.

The application

At least six months before the start of the exhibition the applicant sends a formal application to the Ministry. The information that must be included at this stage includes:

exhibition title
list of items in the exhibition (title or descriptive title, media and size) with individual values and total value in home currency, and total value in New Zealand dollars with the exchange rate stated
probable value of consignments in home currency and in NZ dollars with the exchange rate stated
advice of any single item valued at over NZ$50 million
period for which indemnity is sought (i.e. clarification of the condition reports at which indemnity commences and ceases)
schedule of New Zealand venues with approximate dates
exhibition budget
statement of the significance of the exhibition.

Granting approval

The Ministry prepares a report for the Minister for Arts, Culture and Heritage regarding the application. 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 receives advice from Treasury officials, who may seek further information, and determines whether to grant the indemnity, subject to the negotiation of the Deed. This process can take some weeks.

Negotiating the Deed

The model deed is the basis of the Deed of indemnity. The Deed can be prepared by the applicant or the Ministry. The details of each deed will be particular to the exhibition in question. The applicant and the Ministry may need to negotiate aspects of the Deed. Examples of matters that may need to be negotiated include the:

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.

The applicant must also confirm that the loan agreement(s) include the six clauses referred to above in 'Loan agreement negotiations'.

The negotiation of the details can be a lengthy process. Applicants should have as much information finalised as possible when they apply.

Executing the Deed

Following the negotiations, applicants need to provide the Ministry 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 the Minister of Finance and the applicant.

It is very important that all Deed documents are supplied, as applicants will be in breach of their obligations under the Deed - and not covered by government indemnity -unless all required documents are supplied.

Ongoing obligations

Applicants must advise the Ministry of the progress of the exhibition at the time of arrival and throughout its tour. They must also notify the Ministry in writing on the return of the items to the lender at the conclusion of the indemnification period.

Applicants must immediately report to the Ministry any instance of loss, damage or deterioration as detailed in 'Conditions and criteria'.

They are also required 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 that is supplied will depend on the circumstances of the exhibition
final exhibition budget.

Copies of media clippings, posters, flyers, catalogues or other promotional material not previously supplied should also be forwarded to the Ministry.

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