I’ve checked with a few other C2C experts, and they are in resounding agreement that the standard practice is for the borrowing institution to insure the item. When a museum requests a loan — whether from another museum or from a private lender — it is their expectation that they will cover the insurance and thus they offer to insure in the initial request for the loan. The work will be in their “care, custody and control” and not the owner’s. Why should the owner’s premium go up if the borrower or the borrowers agent damages or loses the work? The borrower would be liable for any damage or loss and their policy would cover the loss – not the lenders. Hand in hand with that, there should never be a deductible for works on loan to a museum.
Some lenders prefer to retain their own insurance and have their insurance broker bill the borrowing museum for their coverage. This is not the norm, but it is their option as it is their property. One circumstance where this might come into play is if the museum is borrowing from a lender in another country and the lender, if there is damage, would not want to have the claim adjudicated under another country’s laws.
A bit of an aside — when the borrowing museum issues a certificate evidencing insurance (CoI) under their policy, the lender will usually ask that they are named as additional insured and loss payee on the certificate. I hope this is helpful.