An avid follower of all insurtech startups and a critical thinker, he has also contributed several papers in organization wide technical paper contests.
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What is Insured:
Traditional rockets, more modern space launch vehicles, satellites assembly, integration and testing, commercial spaceports facility damage, Damage to surrounding facilities, pre-launch activities, launch, in-orbit once the satellite launch stage is finished, transponders, transport of satellites from manufacturing facilities to the launch ports. Recent developments include insurers offering contract analysis, consulting on alternative risk transfer methods, complete insurance program design Now, with Elon Musk’s SpaceX offering space tourism, the lives of space tourists are certainly going to become a good premium source. Coverages are for the physical damage as well as liability cover for any damage to space elements or other satellites at all stages of the cycle.
Risk at Stake (the numbers):
Overall there are about 100 space launches in a year, with 114 space launches globally in 2018. The risk for these launches is high but only about 60% of the launches are insured. It has been a common belief that small satellites (smallsats that collect weather and ship-tracking data) makers do not opt for insurance cover. This is true primarily because smallsat makers are general universities or cash strapped startup who cannot afford to buy insurance. They, therefore, have self-insurance to support any losses in the event of failures. This belief has been changing more recently because smallsats have now begun as commercial operations, earning revenue instead of a university study or technical demonstrations.
LEO satellites (satellites which are in low earth orbit ~2000 km from earth’s surface like the International Space Station, Hubble scope telescope) are generally required in large constellations to provide continuous coverage. Generally, the insurance cover for these wasn’t sought because of the redundancy provision already built-in owing to the number of satellites, thereby ensuring they don’t need to track the performance of individual satellites.
On the contrary, the GEO satellites (ones almost 35,000 km over Earth’s surface) are high-value risks primarily used for communication, television broadcasting (also other non-interactive systems) purposes and are historically insured for launch and sometimes for in-orbit coverage. There has been a recent dearth of GEO satellite launches which is why insurers have seen a soft cycle and when the launches are the sum insured has been low, because of declining prices of satellites and launchers.
Major players in this class of business: Lloyd’s of London, AIG, AXA, XL Catlin, Allianz. Swiss Re (recently exited the market), Marsh, Aon
Recent Developments and Impact:
The space insurance industry has in recent times seen a downturn in bound premiums. To put this in perspective, data cited by XL Catlin says that in 2012, space insurers collected up to $1 billion in premiums however that dropped by about a third in 2017. This gives a fair idea of how low the premiums are in the market currently.
With that said, it must be understood that the soft cycle in the industry is going to last with premiums to rise significantly higher owing to the recent crashes of 2 satellites in 2018, most recent being the Vega crash. Vega crash resulting in loss of rocket and satellite meant for military operations of UAE represents the largest recorded loss, of $411.21 million, in the space market. The other loss in 2018, that of WorldView-4 imaging satellite resulted in insurance loss of $183 million.
With SpaceX already announcing the launch of space tourism and NASA offering a month-long getaway to International Space Station (at $30,000 per night) starting as early as 2020, the space insurance industry is expecting a spike in premiums as well as volume since space tourists would also like to insure themselves when planning a space trip.
References
- https://en.wikipedia.org/wiki/Geosynchronous_satellite
- https://en.wikipedia.org/wiki/Low_Earth_orbit
- https://www.reuters.com/article/us-space-insurance/space-insurance-costs-to-rocket-after-satellite-crash-idUSKCN1UQ1SK
- https://spacenews.com/report-finds-commercial-spaceports-confused-about-insurance-requirements/
- https://spacenews.com/spacex-required-to-carry-more-insurance-for-launches-from-kennedy-space-center/
