Stolen condoms, decomposing carcasses and protesting vandals. Providing cover for modern 4art can pose some tricky problems.

Eviscerations, diced cows, heads made of frozen blood: the new breed of modern art is not only turning the stomachs' of the public, it is also taxing the insurance industry.

Underwriters are no longer faced with just insuring art created out of more traditional materials such as oil and watercolour; they must grapple with less conventional materials. A visit to the annual Turner Prize exhibition or the Saatchi gallery on London's South Bank reveals that the work of today's young artists is more likely to feature flesh, bone and faeces than oil on canvas.

Paul Britton, valuations manager at loss adjuster Cunningham Lindsey, says the material used by some contemporary art raises serious questions for underwriters.

"Modern British artists such as Damien Hirst are using organic materials in their work. It begs the question of how long these pieces will last."

Hirst is of course famous for his pieces involving sliced cows in formaldehyde. Britton says that insurers may be reluctant to insure contemporary art because of uncertainty over the materials used and their longevity.

"It can be difficult to get the required information from the artist," he adds. "The artist may not care if the piece decays as it is conceptual in nature - the difficulty is that others may view it as an investment.

"I have known insurers to exclude an artist because of the fragility of the work. Or they will write inherent vice clauses (which exclude decay) into the contract or add conditions on storage or transportation."

Theft can also cause problems for underwriters. Many works of modern art are made up of individual items that are brought together to represent a theme or idea. A prime example is Tracey Emin's soiled bed installation, representing a period in the artist's life when she underwent a nervous breakdown.

This well-known piece, currently in the Saatchi Gallery, comprises a dirty, unmade bed, littered with used condoms, crumpled cigarette packets and empty bottles of vodka.

The problem for the owners and insurers of such a work is that someone might be tempted to steal some of the items that create the piece - although why anyone might want a used condom is another matter.

Hiscox chairman Robert Hiscox says: "In the case of the Emin bed, if a condom were stolen would that be a partial loss [and as such an insurance issue]? Or could the condom simply be replaced and the work recreated?"

Some argue that in the case of conceptual art, the art is not the items that create the piece, but the idea and its execution. If this is the case, a stolen, or indeed lost, condom, vodka bottle or other object could be replaced by another without any recourse to insurers. But it is not that simple.

"Every partial loss is a negotiation. It requires sensitivity from the underwriter. The owner may not want it recreated," says Hiscox.

AXA Art underwriting director David Scully encourages dealers, museums and other insureds to agree in advance what the artist wants to happen, in terms of restoration or repair, if the piece is damaged.

"The art is a concept, not a physical manifestation. We try to get agreement as to what can be replaced to retain the concept. It is best to do this before a claim happens, as people are more flexible.

"We try to have a conversation with the artist - look at why he or she might be against a particular course of action. If the replacement would make the painting worth less, we would take that into consideration. Generally they are pretty pragmatic. We try to be sympathetic."

The offensive nature of some modern art also has implications for underwriters. Marcus Harvey's controversial painting of child killer Myra Hindley made the headlines eight years ago when it was attacked using eggs and ink while hanging in the Royal Academy of Arts. The painting was made using the tiny handprints of children.

Is art such as this insurable? And, as in the case of Harvey's work, if it is likely to be attacked by members of the public, can the resulting damage be insured against?

Scully says that attacks against an insured piece would be covered. But he says that he would refuse to insure a private collection of obscene or offensive art, although a dealer who had an individual piece could be covered.

Of course the question of what is offensive or obscene is, like the question of what is art itself, a difficult one. Can or should insurers make that decision?

"We are not taste police," says Scully, acknowledging that for the most part it is not the job of the insurance industry to make judgments of this kind.