How an £8m gamble on stolen Turners netted Tate £17m - to spruce up its Turners

The Tate is to invest £10m in new art and finish cataloguing its entire works of J M W Turner thanks to a calculated insurance gamble which netted it £17m.

The Tate is to invest £10m in new art and finish cataloguing its entire works of J M W Turner thanks to a calculated insurance gamble which netted it £17m.

The money is one of the biggest financial windfalls in years for the gallery and will also enable it to research specialist areas such as British Romantic paintings and to open its store in Southwark, London, to the public.

The funds are the remains of an insurance claim which followed the theft of two of its paintings by Turner from an exhibition in Germany in 1994. Insurers paid out £24m for Shade and Darkness - the Evening of the Deluge and Light and Colour - the Morning after the Deluge but would have owned them if they were ever recovered.

The Tate gambled that the paintings would turn up eventually, paid the insurers an £8m fee to buy back the title to the works and was rewarded when one was retrieved in 2001 and the other the following year. Having spent £3.5m on the hunt and having collected considerable interest on the original sum, it was left with £17m.

It took legal advice on whether it could spend the cash on the gallery as a whole or whether, as the Turners were part of the artist's bequest to the nation when he died in 1851, the cash had to go towards the bequest. After consultations which went to the Attorney General, the trustees have been told they are free to use the funds for the benefit of the entire collection.

About £1m will be spent on cataloguing the Turner Bequest, which consists of nearly 300 oil paintings and around 30,000 sketches and watercolours. This enormously important act of scholarship began nearly 100 years ago, but with new researchers could be completed within five years.

A further £10m will go into the endowment fund which the Tate established last year. The aim is to raise £100m to enable the gallery to buy new works as its own funds are severely restricted and it has no dedicated cash for purchases.

Sir Nicholas Serota, the director of Tate, said: "It's a wonderful opportunity to do something really good. It's a tremendous sum of money and the largest sum we've had come in for some time.

"It was a great loss when the Turners were stolen in 1994 and it is a great relief for us to now have both the paintings returned and a sum of money which will enhance our understanding of Turner, create opportunities to acquire works for the Collection and help us fulfil our responsibility for caring for it."

Asked whether the insurance deal had been a gamble, Sir Nicholas called it "judgement". "I believed the paintings were still undamaged or at least in existence and that eventually works like this do emerge. I didn't know whether it would be five, 10 or 15 years, but I thought it was worth buying the title."

David Blayney Brown, one of Tate's Turner experts, said: "This funding will allow us to fulfil the ambition of every Turner scholar which is to see the works on paper of Britain's greatest landscape painter properly catalogued and contextualised with the aid of modern scholarship and the knowledge gained from nearly 100 years since A J Finberg first set out on this task."

To put the windfall in context, the Tate has spent £28m on buying works of art in the past two years of which £17m was given by individuals and the remainder raised by Tate itself with the help of lottery bodies and the National Art Collections Fund charity.

Announcing the establishment of an endowment fund for future purchases last year, Paul Myners, the chairman of the Tate trustees, said it had spent £2m of its own money on new works at a peak in 1984, down to around £750,000 two decades later, while inflation in the art market had soared.

He said the Tate galleries would slowly lose their status among the world's leading galleries if they failed to fill gaps in their collections and did not continue buying contemporary art.