Author Topic: Insurance Q&A (Satellites & Launchers)  (Read 452 times)

Online sanman

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Insurance Q&A (Satellites & Launchers)
« on: 09/17/2018 12:26 AM »
How does the whole insurance thing work for satellites and launchers?

Who has to buy insurance, and who sells it to them? How much do they have to buy, and what determines the pricing?
What can coverage include? Is it purely monetary coverage against liability? Or can I get a replacement satellite relay if mine gets busted for some reason, to protect my business?

What proportion do insurance costs typically make up out of overall costs?
How are these costs trending? Are they going up for some, going down for others?
What, if any, evolution is happening in this industry?

Are there any binding international laws directly affecting insurance and liability for space-related activities, or is it all still mainly under various national laws as part of issuance of launch license? What are the legal requirements in the United States, for example?
« Last Edit: 09/17/2018 12:29 AM by sanman »

Offline Lar

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Re: Insurance Q&A (Satellites & Launchers)
« Reply #1 on: 09/17/2018 06:58 PM »
As bascially legalized betting against yourself, insurance companies will write insurance for a wide variety of possible outcomes. A Berkshire Hathaway subsidiary offers "Hole in One" insurance for example, which pays off if someone wins a golf contest (most of these go unwon, so they offer quite lavish prizes for relatively modest premiums).

So I am sure that insurance for the launch cost, the mission cost, the hardware, etc are all available, as well as liability insurance.  We have seen (in discussion in other threads) that rates change... for example Proton rates are going up. F9 are staying flat or going down. (rates go up a lot more quickly than they go down... )

But I think you might be asking what is required. I think that depends on the legal regime at the launch location.
« Last Edit: 10/10/2018 09:40 PM by Lar »
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Online gongora

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Re: Insurance Q&A (Satellites & Launchers)
« Reply #2 on: 09/17/2018 07:18 PM »
You can see some of the minimum launch liability insurance amounts for U.S. companies in their launch licenses:

I don't know much about satellite insurance, but I'm pretty sure it's all monetary.  I don't think an insurance company is going to commit to building a replacement satellite.
« Last Edit: 09/17/2018 07:18 PM by gongora »

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Re: Insurance Q&A (Satellites & Launchers)
« Reply #3 on: 10/10/2018 08:34 PM »
There's a lot going on in your questions with regards to different types of insurance involved in the space business.  As Lar pointed out, you can get insurance for pretty much any perceived business risk, provided you are willing to pay enough.

There are instances in the space business where insurance is required - particularly with regards to 3rd party damages resulting from launches.  It gets complicated quick.

When it comes to liability - the international legal regime is guided by the U.N.'s "Convention on International Liability for Damage Caused by Space Objects" - which generally places the liability on the launching state:  That principle, which basically flows down from the outer space treaty, is an important driver for why countries establish oversight/licensing regimes for launches from their territory.

Each space fairing country creates its own regime for how it deals with space launch liability, but nearly all launching countries provide some sort of government backstop ("indemnification") to the launch companies' liability for 3rd party losses, even for non-governmental ("commercial") launches. 

In the U.S., in order to obtain a commercial launch license a company is required to purchase insurance or "demonstrate financial responsibility" (in other words, set a bunch of money aside) for 3rd party damages up to the amount the FAA determines to be the "maximum probably loss."  My understanding is that typical MPL's for large commercial launches are often in the tens of millions of dollars, and the insurance generally costs something on the order of 10% of the coverage. So for a ~$100 million launch with an MPL of $40 million, the 3rd party liability insurance might be a few million dollars.  The trajectory, explosive potential for the rocket, reliability, etc all factor into the price. A small, highly reliable rocket launching from a very remote location that doesn't really overfly anything would be much cheaper than a large, unproved rocket that launches from/over (or returns to) a relatively populated area.

Above the MPL amount, the U.S. government indemnifies the launch provider up to a certain limit specified in law. I think it's around $1-2 Billion or so. Then for any losses above that limit the company is back on the hook. The "catch" is that the U.S. government's responsibility is only to the extent Congress appropriates the money following a loss. This GAO report discusses the U.S. indemnification and launch insurance regime in some detail:

And this posting by former FAA attorney Laura Montgomery provides some commentary: