Insurance rates for different launch providers

[FutureSpaceTourist]

Will insurance force Russia’s Proton rocket out of the commercial satellite business?

by Peter B. de Selding | Oct 18, 2017

https://www.spaceintelreport.com/will-insurance-force-russias-proton-rocket-commercial-satellite-business/

Article says that insurance premiums for Proton launches are about 12% of the insured value, as opposed to 3-4% for Ariane 5 and 4-5% for the Falcon 9. Thought this interesting too:

But the low insurance rates for Ariane 5 and Falcon 9 mean total premium revenue for 2016 was insufficient to cover a single major launch failure, and 2017 looks no better.

[Rebel44]

Will insurance force Russia’s Proton rocket out of the commercial satellite business?

by Peter B. de Selding | Oct 18, 2017

Thought this interesting too:

But the low insurance rates for Ariane 5 and Falcon 9 mean total premium revenue for 2016 was insufficient to cover a single major launch failure, and 2017 looks no better.

Its just simple math - with known flight rates and these insurance premiums, its clear that insurance companies expect to cover less than 1 major launch failure per year for either Ariane 5 or Falcon 9 - we will see if that turns out to be true or not.

[john smith 19]

Its just simple math - with known flight rates and these insurance premiums, its clear that insurance companies expect to cover less than 1 major launch failure per year for either Ariane 5 or Falcon 9 - we will see if that turns out to be true or not.

It's interesting that how launch rate balances out launch failure.  Get that up (and make them successful) and insurers get enough in the kitty and a good enough track record to lower the rates.

Atlas V should have fairly low rates as well, given it's success rate is about 2nd only to Ariane 5. The interesting question is how reusability should affect rates for SX.

My instinct is the Russians will have to set up an insurance subsidiary. It's the only way they can lower their prices enough to get the launch rate up to encourage the rest of the insurance market to lower there premiums back to a competitive level.

[LouScheffer]

Article says that insurance premiums for Proton launches are about 12% of the insured value, as opposed to 3-4% for Ariane 5 and 4-5% for the Falcon 9. Thought this interesting too:

But the low insurance rates for Ariane 5 and Falcon 9 mean total premium revenue for 2016 was insufficient to cover a single major launch failure, and 2017 looks no better.

But why should premiums for a year cover a launch failure?  Ariane 5 has not failed for about 15 years.   Therefore a break-even premiums for year  would only cover 1/15 of a launch failure.  As of now, the insurance companies have collected 80 straight premiums for Ariane, without a single payout.  At 4%, that's about 3.2 payloads worth in the bank, not including what they've earned by investing the money over that time.  They could afford to lose one or two payloads and still be solidly in the black.  If anything, insurance for Ariane seems way more expensive than the statistics dictate.

[abaddon]

But why should premiums for a year cover a launch failure?  Ariane 5 has not failed for about 15 years.   Therefore a break-even premiums for year  would only cover 1/15 of a launch failure.  As of now, the insurance companies have collected 80 straight premiums for Ariane, without a single payout.  At 4%, that's about 3.2 payloads worth in the bank, not including what they've earned by investing the money over that time.  They could afford to lose one or two payloads and still be solidly in the black.  If anything, insurance for Ariane seems way more expensive than the statistics dictate.

I believe the insurance talked about here is for launch and first year on-orbit.

No idea if that changes the numbers.

[ringsider]

Article says that insurance premiums for Proton launches are about 12% of the insured value, as opposed to 3-4% for Ariane 5 and 4-5% for the Falcon 9. Thought this interesting too:

But the low insurance rates for Ariane 5 and Falcon 9 mean total premium revenue for 2016 was insufficient to cover a single major launch failure, and 2017 looks no better.

But why should premiums for a year cover a launch failure?  Ariane 5 has not failed for about 15 years.   Therefore a break-even premiums for year  would only cover 1/15 of a launch failure.  As of now, the insurance companies have collected 80 straight premiums for Ariane, without a single payout.  At 4%, that's about 3.2 payloads worth in the bank, not including what they've earned by investing the money over that time.  They could afford to lose one or two payloads and still be solidly in the black.  If anything, insurance for Ariane seems way more expensive than the statistics dictate.

The probability of each failure event is independent from the history. It's more like long term roulette. You put 3 tokens on a single number - the premium - and spin the wheel. 35/36 times you - the launch operator - lose your bet and the house sweeps it. But at any time the house - the insurer - can lose 105 tokens. The premiums are set against that long run expectation as even if the house doesn't lose for 80 turns (240 tokens), it could lose 105 on the next one and then again on the very next one. After which, as a good insurance underwriter, they would of course decline further insurance and sit on a 30 token long run profit...

And of course there are costs. They need to run the underwriting operation, do the sales work, reserve the funds, pay legal fees, be ready to defend paying a claim etc.

[Mader Levap]

Interesting, there were claims that Ariane 5 and F9 have same insurance rates. They have not, but I agree they are still strangely very close values considering their launch success to failure ratio.

This kind of thing causes me to treat not very seriously claims like "insurance of used core is practically same as new, so they must have same chance of blowing up!".

[LouScheffer]

The probability of each failure event is independent from the history. It's more like long term roulette. You put 3 tokens on a single number - the premium - and spin the wheel. 35/36 times you - the launch operator - lose your bet and the house sweeps it. But at any time the house - the insurer - can lose 105 tokens. The premiums are set against that long run expectation as even if the house doesn't lose for 80 turns (240 tokens), it could lose 105 on the next one and then again on the very next one. After which, as a good insurance underwriter, they would of course decline further insurance and sit on a 30 token long run profit...

And of course there are costs. They need to run the underwriting operation, do the sales work, reserve the funds, pay legal fees, be ready to defend paying a claim etc.

But the costs are more than offset by the investment income.  If they invest their 3 tokens gained per launch over the 15 years in a 6% investment, at the end of 80 launches they have not 240 tokens but more than 360.  So it would take at least 4 failures before they lose money.   Considering that Ariane has been OK 80 times in a row, and that any failure would be thoroughly investigated, that's a pretty safe bet.  They've made hundreds of millions on Ariane so far.

[su27k]

Interesting, there were claims that Ariane 5 and F9 have same insurance rates. They have not, but I agree they are still strangely very close values considering their launch success to failure ratio.

Not strange at all:
Ariane 5: 4/95 = 4.2%
Falcon 9: 2/43 = 4.6%

[woods170]

Interesting, there were claims that Ariane 5 and F9 have same insurance rates. They have not, but I agree they are still strangely very close values considering their launch success to failure ratio.

Not strange at all:
Ariane 5: 4/95 = 4.2%
Falcon 9: 2/43 = 4.6%

Indeed. People seem to forget that Ariane 5 suffered two (2) complete failures (Ariane 501 and 517) as well as two (2) partial failures (Ariane 502 and 510). The two partial failures left several payloads in unusable orbits and resulted in insurance companies paying for the "lost" payloads (A payload does not have to be destroyed in a catastrophic launch mishap to be a total loss. Ending up in a useless orbit is every bit as much a total loss).


Additionally, for Proton:

Past 20 years of service: 13/162 = 8,0%
Past 10 years of service: 10/85 = 11,8%

So, the failure rate of Proton shot up in the last 10 years. A failure rate of nearly 12% in the last decade fits nicely with current insurance rate (12%) for Proton.

[savuporo]

Article says that insurance premiums for Proton launches are about 12% of the insured value, as opposed to 3-4% for Ariane 5 and 4-5% for the Falcon 9. Thought this interesting too:

I want to see the insurance bill for JWST

[woods170]

Article says that insurance premiums for Proton launches are about 12% of the insured value, as opposed to 3-4% for Ariane 5 and 4-5% for the Falcon 9. Thought this interesting too:

I want to see the insurance bill for JWST

You won't see that bill, for one very good reason:

JWST is a US government payload (NASA being a US government agency). Government payloads are NOT insured. Governments usually self-insure.
Exactly the same applies to the ESA owned payloads on JWST.

[LouScheffer]

Interesting, there were claims that Ariane 5 and F9 have same insurance rates. They have not, but I agree they are still strangely very close values considering their launch success to failure ratio.

Not strange at all:
Ariane 5: 4/95 = 4.2%
Falcon 9: 2/43 = 4.6%

I suspect the insurance companies use less naive statistics. For Ariane, if the failure rate was uniform, then the odds of 4 failures in the first 15 would be (4/95)^4 x (91/95)^11 * (15 choose 4) = 0.0026.  The odds of 80 straight successes thereafter is (91/95)^80 = 0.032.  The odds that both are true (4 failures in the first 15, followed by 80 successes) is 0.000083.

The natural conclusion (which coincides with common sense, and experience with other rocket families) is that, most likely,  Ariane was less reliable than 4% in the early days, and is more reliable lately, as problems are understood and fixed.  How much better cannot be determined from the data alone, and depends a lot on your model, and how certain you need the results to be, but a crude estimate is that you need 99% reliability to have a 50% chance of getting through 80 launches without a failure.  Of course it is possible that the failure rate is still 4%, and they have just gotten lucky the last 80 launches, but that's not the way to bet.

[savuporo]

Governments usually self-insure.

In case of ~10 billion dollar space telescope that takes 20 years to build, this term doesn't actually mean anything in practice, does it ? It's not like there is any feasible recovery of the potential loss here.

[TrevorMonty]

Governments usually self-insure.

In case of ~10 billion dollar space telescope that takes 20 years to build, this term doesn't actually mean anything in practice, does it ? It's not like there is any feasible recovery of the potential loss here.

If worst happen a replacement JWST wouldn't cost anywhere near $10B. Most of that money was spent on solving engineering problems not the actual build.

[envy887]

Interesting, there were claims that Ariane 5 and F9 have same insurance rates. They have not, but I agree they are still strangely very close values considering their launch success to failure ratio.

Not strange at all:
Ariane 5: 4/95 = 4.2%
Falcon 9: 2/43 = 4.6%

I suspect the insurance companies use less naive statistics. For Ariane, if the failure rate was uniform, then the odds of 4 failures in the first 15 would be (4/95)^4 x (91/95)^11 * (15 choose 4) = 0.0026.  The odds of 80 straight successes thereafter is (91/95)^80 = 0.032.  The odds that both are true (4 failures in the first 15, followed by 80 successes) is 0.000083.

The natural conclusion (which coincides with common sense, and experience with other rocket families) is that, most likely,  Ariane was less reliable than 4% in the early days, and is more reliable lately, as problems are understood and fixed.  How much better cannot be determined from the data alone, and depends a lot on your model, and how certain you need the results to be, but a crude estimate is that you need 99% reliability to have a 50% chance of getting through 80 launches without a failure.  Of course it is possible that the failure rate is still 4%, and they have just gotten lucky the last 80 launches, but that's not the way to bet.

While the insurance underwriters undoubtedly us a more complex model, you don't need elaborate statistics to derive expected failure rates remarkably similar to the insurance rates for the currently operational variants. Using a simple first level Bayesian estimate of (successes+1)/(attempts+2) yields expected launch failure rates of 3% of Ariane 5 ECA (64/66), and 4% for Falcon 9 v1.2 (25/26).

Ariane 5 ECA doesn't fly enough to ensure statistical confidence that its probable failure rate is truly the 1.6% that its record shows. And insurers likely weight successful flights from 10 or more years ago lower than recent flights, as they should (and do) lower the weighting of failures from the same time frame. It's plausible that variance in manufacturing and operation of the vehicle could change enough over those time frames to change the failure rate substantially (as indeed did happen with Proton).

[Zed_Noir]

The insurance rate for the Falcon 9 is 4-5% of the standard launch cost of $62M, that works out to about $2.5M to $3.1M.

Compare that to the insurance rate for the Ariane 5 of 3-4% of the $178M laumch cost  stated in a recent GAO report. Which works out to $5.3M to $7.1M.

That means it should be cheaper for insurance with a Falcon 9 even with a dual manifested Ariane 5 for GTO comsats.

[david1971]

The insurance rate for the Falcon 9 is 4-5% of the standard launch cost of $62M, that works out to about $2.5M to $3.1M.

Compare that to the insurance rate for the Ariane 5 of 3-4% of the $178M laumch cost  stated in a recent GAO report. Which works out to $5.3M to $7.1M.

That means it should be cheaper for insurance with a Falcon 9 even with a dual manifested Ariane 5 for GTO comsats.

Aren't those percentages of the value of the payload, not the launch cost?  Because it's the payload that really needs to be replaced, I'm assuming you would get a free reflight.

[woods170]

Governments usually self-insure.

In case of ~10 billion dollar space telescope that takes 20 years to build, this term doesn't actually mean anything in practice, does it ? It's not like there is any feasible recovery of the potential loss here.

No, you don't understand. For governments, there is no need to recover their investment in (the unlikely) case their investment (JWST) is lost. Governments are not commercial companies. The rules of the game are quite different for governments.

[IRobot]

Governments usually self-insure.

In case of ~10 billion dollar space telescope that takes 20 years to build, this term doesn't actually mean anything in practice, does it ? It's not like there is any feasible recovery of the potential loss here.

If worst happen a replacement JWST wouldn't cost anywhere near $10B. Most of that money was spent on solving engineering problems not the actual build.

Unsure how the program is managed, but if I were in charge, a 2nd complete telescope would be ordered as spare. Or at least the critical parts, one-offs, that are hard to remake, like custom sensors, optics, electronics, etc.