SpaceX Falcon 9 : SXM-7 : CC SLC-40 : December 13, 2020 (17:30 UTC)

[niwax]

This isn't good news for the insurance industry. They have been on the edge for years and the recent record payouts for Vega were enough to shrink the market. They won't be thrilled about a $225m payout in January in the year multiple rockets will fly their first-ever customer payload.

[Jansen]

This isn't good news for the insurance industry. They have been on the edge for years and the recent record payouts for Vega were enough to shrink the market. They won't be thrilled about a $225m payout in January in the year multiple rockets will fly their first-ever customer payload.

It really depends on what the issue is. If it was a design flaw, then Maxar would be liable in part and it will affect the SXM-8 launch and possibly others using the same bus. If it was an error during commissioning, then the liability will probably be assumed by SXM and the insurer.

Premiums for SpaceX launches are currently around 5% of the launch and satellite cost, due to the high launch reliability rate for Falcon 9.

For now, I see premiums going up for Maxar satellites. Won’t really affect SpaceX launches too much. But yeah, new rockets with unproven histories will see very high premiums.

As is common in the insurance industry, the policy was reinsured by multiple other insurers to spread out the risk.

https://spacenews.com/sxm-7-problem-revealed/

The problem with SXM-7 is likely to have a significant impact on the space insurance market, a satellite insurer said. The satellite was insured for $225 million, SiriusXM said in its SEC filing.

The risk was spread among approximately 20 insurers, according to the insurer. SiriusXM said in its SEC filing that it “notified the underwriters of these policies of a potential claim with respect to SXM-7.”

[Jansen]

Here is the Form 8-K filed by Sirius XM:
https://www.streetinsider.com/dr/news.php?id=17869764

The accompanying Form 8-K by Maxar trying to avoid liability:
https://www.streetinsider.com/dr/news.php?id=17871021

We have purchased insurance policies covering SXM-7 through launch and the first year of in-orbit operation. The aggregate coverage under those insurance policies is $225 million.

Note that the $225 million covers the satellite, the launch, and the first year of operation.

[Nomadd]

 Not looking good for Maxar.

""When it was going through the testing phase, they discovered a performance [problem] ... but apparently they didn't totally fix it," Quilty said. He said Maxar wound up paying millions more in the attempt to fix the issue."

https://www.upi.com/Science_News/2021/01/27/Sirius-XM-says-its-newest-satellite-has-malfunctioned/6921611776599/

[gongora]

Not looking good for Maxar.

""When it was going through the testing phase, they discovered a performance [problem] ... but apparently they didn't totally fix it," Quilty said. He said Maxar wound up paying millions more in the attempt to fix the issue."

https://www.upi.com/Science_News/2021/01/27/Sirius-XM-says-its-newest-satellite-has-malfunctioned/6921611776599/

Maxar mentioned in their quarterly reports last year that one satellite program had issues, and it was assumed to be SXM.

[the_other_Doug]

So, let me get this straight....

1.  Maxar knew there was a problem with SXM-7.  Per the Science News article, they spent "millions" in an attempt to make it flightworthy.

2.  Sirius XM launched the satellite anyway, and the problem that Maxar spent so much money trying to fix showed itself to not be fixed.

3.  Depending on the actual problem (which no one will discuss, apparently), SXM-7 is now either partially or totally non-operational, due to the known issue that Maxar said they fixed.

4.  No one seems to know, or at least wants to discuss, how much Sirius XM knew of this issue prior to accepting the vehicle from Maxar.  And no one knows if Maxar actually thought they had fixed the problem, or if, a la Boeing and the 737 MAX, they figured they had just covered over their involvement legally, in case their fix didn't work.  In other words, no one knows if Maxar and everyone in the chain thought the problem was resolved, or if someone in the chain knew it wasn't and lied about it in the documentation in order to cover their own butts, or whatever.

So, my question -- can't the insurance company refuse to pay out, based on the fact that the satellite provider, Maxar, knowingly provided a spacecraft that had a higher likelihood of failure than specified in the insurance application?

Obviously, I don't have access to the details of how Maxar insured itself against its liability, but generally speaking, if when applying for insurance you state the chances of spacecraft failure are, say, 0.1% (based on the history of prior satellites flown) and then do not provide details to your insurer about technical problems requiring millions of dollars worth of repair attempts -- meaning the issues were *not* minor -- isn't the insurance company within its rights to deny coverage?

I'd have to think that, in a situation where the manufacturer knows of a problem, and that problem causes an in-flight failure, if the insurer knew of the repair attempts, they would insert a clause into the contract stating that mission failures caused by the issue Maxar attempted to repair would not be covered.  I mean, it's how insurance companies generally work.  They either add a rider stating certain things at higher risk of failure are not covered, or they noticeably increase the cost of the insurance on that particular satellite.  Or at least failures due to the known issue.

If I had to guess, I'd bet that Maxar ends up providing Sirius XM with a free satellite, and has to eat the cost without any payout from insurance.  Just based on how the insurance industry works.  Sirius XM may end up eating the launch costs, since the launch was not the cause of the partial/total loss of the spacecraft.

[gongora]

So, my question -- can't the insurance company refuse to pay out, based on the fact that the satellite provider, Maxar, knowingly provided a spacecraft that had a higher likelihood of failure than specified in the insurance application?

I haven't seen any reporting that Maxar did any such thing.

[cpushack]

If only there was a way to go up there, grab the satellite, bring it back and fix it.

Starship may eventually make that possible

[ZachS09]

If only there was a way to go up there, grab the satellite, bring it back and fix it.

Starship may eventually make that possible

The Space Shuttle used to do such tasks back then.

[Zed_Noir]

If only there was a way to go up there, grab the satellite, bring it back and fix it.

Starship may eventually make that possible

The Space Shuttle used to do such tasks back then.

You are mistaken. The Space Shuttle can not get up to GSO where SXM-7 is right now, it only got up to 620 km altitude at apogee for missions with the Hubble telescope.

[ZachS09]

If only there was a way to go up there, grab the satellite, bring it back and fix it.

Starship may eventually make that possible

The Space Shuttle used to do such tasks back then.

You are mistaken. The Space Shuttle can not get up to GSO where SXM-7 is right now, it only got up to 620 km altitude at apogee for missions with the Hubble telescope.

I was referring to Low Earth Orbit satellites. I knew the Shuttle couldn't get to GSO.

[Nomadd]

If only there was a way to go up there, grab the satellite, bring it back and fix it.
Starship may eventually make that possible

The Space Shuttle used to do such tasks back then.

http://rammb.cira.colostate.edu/dev/hillger/Shuttle-related.htm

[Jansen]

Not looking good for Maxar.

""When it was going through the testing phase, they discovered a performance [problem] ... but apparently they didn't totally fix it," Quilty said. He said Maxar wound up paying millions more in the attempt to fix the issue."

https://spaceflightnow.com/2021/01/28/siriusxm-reveals-failure-on-satellite-launched-from-cape-canaveral-last-month/

Dan Jablonsky, Maxar’s president and CEO, said in an earnings call with investment analysts last May that the company set aside $14 million for “rework” on the unspecified commercial satellite. Ground testing uncovered an “undetected issue with a design that goes back over two years, but is just now surfacing and final testing,” Jablonsky said.

$14 million spent on fixing a design issue that ended up not working.

[GWR64]

https://spaceflightnow.com/2021/01/28/siriusxm-reveals-failure-on-satellite-launched-from-cape-canaveral-last-month/

Dan Jablonsky, Maxar’s president and CEO, said in an earnings call with investment analysts last May that the company set aside $14 million for “rework” on the unspecified commercial satellite. Ground testing uncovered an “undetected issue with a design that goes back over two years, but is just now surfacing and final testing,” Jablonsky said.

$14 million spent on fixing a design issue that ended up not working.

Again a slightly larger quote (emphasis mine)

Maxar said last year that it discovered an “anomaly” during a test on one of the company’s commercial satellite programs. While Maxar never publicly confirmed the identify of the satellite, it is believed to have been SiriusXM’s SXM 7 spacecraft.

Dan Jablonsky, Maxar’s president and CEO, said in an earnings call with investment analysts last May that the company set aside $14 million for “rework” on the unspecified commercial satellite. Ground testing uncovered an “undetected issue with a design that goes back over two years, but is just now surfacing and final testing,” Jablonsky said.

So this is pure speculation, it could also be StarOne D2, which is more than a year behind schedule. (even just speculated)

[Jansen]

So this is pure speculation, it could also be StarOne D2, which is more than a year behind schedule. (even just speculated)

I didn’t want to quote too much of the article due to copyright issues, but if you read through the whole timeline, there is a convincing case for why it is SXM-7. In particular:

At the time of the August conference call, the SXM 7 satellite was the only Maxar-built spacecraft due to ship to its launch site before the end of 2020. And the unique design of the SXM 7 satellite, with its large deployable antenna, also fit with Jablonsky’s statements.

[gongora]

We don't know what the failure is on SXM-7, and we don't know in any detail what rework was done by Maxar last year, so we really don't know for sure the two are related.

[CorvusCorax]

We don't know what the failure is on SXM-7, and we don't know in any detail what rework was done by Maxar last year, so we really don't know for sure the two are related.

Chilling possibility - If the issues are not related, then Maxar would be in even deeper *******.

[Vanspace]

So, let me get this straight....

1.  Maxar knew there was a problem with SXM-7.  Per the Science News article, they spent "millions" in an attempt to make it flightworthy.

2.  Sirius XM launched the satellite anyway, and the problem that Maxar spent so much money trying to fix showed itself to not be fixed.

3.  Depending on the actual problem (which no one will discuss, apparently), SXM-7 is now either partially or totally non-operational, due to the known issue that Maxar said they fixed.

4.  No one seems to know, or at least wants to discuss, how much Sirius XM knew of this issue prior to accepting the vehicle from Maxar.  And no one knows if Maxar actually thought they had fixed the problem, or if, a la Boeing and the 737 MAX, they figured they had just covered over their involvement legally, in case their fix didn't work.  In other words, no one knows if Maxar and everyone in the chain thought the problem was resolved, or if someone in the chain knew it wasn't and lied about it in the documentation in order to cover their own butts, or whatever.

So, my question -- can't the insurance company refuse to pay out, based on the fact that the satellite provider, Maxar, knowingly provided a spacecraft that had a higher likelihood of failure than specified in the insurance application?

Obviously, I don't have access to the details of how Maxar insured itself against its liability, but generally speaking, if when applying for insurance you state the chances of spacecraft failure are, say, 0.1% (based on the history of prior satellites flown) and then do not provide details to your insurer about technical problems requiring millions of dollars worth of repair attempts -- meaning the issues were *not* minor -- isn't the insurance company within its rights to deny coverage?

I'd have to think that, in a situation where the manufacturer knows of a problem, and that problem causes an in-flight failure, if the insurer knew of the repair attempts, they would insert a clause into the contract stating that mission failures caused by the issue Maxar attempted to repair would not be covered.  I mean, it's how insurance companies generally work.  They either add a rider stating certain things at higher risk of failure are not covered, or they noticeably increase the cost of the insurance on that particular satellite.  Or at least failures due to the known issue.

If I had to guess, I'd bet that Maxar ends up providing Sirius XM with a free satellite, and has to eat the cost without any payout from insurance.  Just based on how the insurance industry works.  Sirius XM may end up eating the launch costs, since the launch was not the cause of the partial/total loss of the spacecraft.

While that is all pretty much speculation the final answer is nearly certain.

Sirius, Sirius's insurer, Maxar, Maxars insurer, 20 re-insurers and probably a couple vendors to be named later will end up settling just before the court date in a few years.

There is $225 million involved. Any competent lawyer can find something to spread the blame around in any contract as complex as this. Who signed off on what and how that shifts liability will certainly be a central issue and is likely to ultimately reduce Maxars liability. Even a flimsy defence can help negotiate a lower settlement so Maxar has 225 million reasons to at least develop a legal defence. Of course, its a contract law case with many parties and insurers involved so the one thing you can bet with 99.9% certainty is it will settle before trial.
 

[gongora]

From MAXAR quarterly earnings

SXM-7 satellite

On January 27, 2021, Sirius XM Holdings Inc. (“Sirius XM”) announced in its public filings with the U.S. Securities and Exchange Commission that there is an evaluation underway to determine the extent of damage to its SXM-7 satellite caused by certain events on January 16, 2021. The SXM-7 satellite was constructed by the Company and launched by Sirius XM on December 13, 2020. As of December 31, 2020, the satellite was functioning as intended.

As of February 11, 2021, although there can be no assurance of full recovery of the operations of the SXM-7 satellite, the Company was continuing the process of troubleshooting and diagnosing the situation. However, on that date, Sirius XM asserted to the Company that the SXM-7 satellite is a “total loss”.

As previously disclosed, the Company’s contractual arrangements with Sirius XM for the construction of the SXM-7 satellite include industry-standard provisions regarding, among other things, transfer of risk of loss upon launch. As of December 31, 2020, the Company had $15 million in unbilled receivables that are collectible from Sirius XM upon in-orbit acceptance of the SXM-7 satellite (the “Acceptance Receivables”) and $14 million in orbital receivables that are collectible over the satellite’s expected in-orbit life of 15 years (the “Orbital Receivables” and, collectively with the Acceptance Receivables, the “Receivables”), for which the entire amount of the Receivables were considered collectible. If the SXM-7 satellite is validly declared a “total loss” pursuant to the Company’s contractual arrangements, the collectability of the entire $29 million of Receivables would be at risk. In addition to the risk associated with the outstanding receivables, the Company may be exposed to liquidated damages not previously accrued at December 31, 2020 of up to $9 million.

From Sirius XM quarterly earnings:

We have entered into agreements for the design, construction and launch of two additional satellites, SXM-7 and SXM-8. On December 13, 2020, SXM-7 was successfully launched. In-orbit testing of SXM-7 began on January 4, 2021. During in-orbit testing of SXM-7, events occurred which have caused failures of certain SXM-7 payload units. An evaluation of SXM-7 is underway. The full extent of the damage to SXM-7 is not yet known.

We do not expect our satellite radio service to be impacted by these adverse SXM-7 events. Our XM-3 and XM-4 satellites continue to operate and are expected to support our satellite radio service for several years. In addition, our XM-5 satellite remains available as an in-orbit spare. Construction of our SXM-8 satellite is underway and that satellite is expected to be launched into a geostationary orbit in 2021.

Satellite Insurance.  We have procured insurance for SXM-7 and SXM-8 to cover the risks associated with each satellite's launch and first year of in-orbit operation. The aggregate coverage under those insurance policies with respect to SXM-7 is $225 million. We have notified the underwriters of these policies of a potential claim with respect to SXM-7. We do not have insurance policies covering our other in-orbit satellites as we consider the premium costs to be uneconomical relative to the risk of satellite failure.

[Herb Schaltegger]

Directv had a similar on-orbit issue with one of their satellites a number of years ago; it was believed by sat-watchers at the time that the failure involved at least partial failure of the RF reflector and/or waveguide(s) used for some of the spot-beam transponders on that satellite. To be clear, that was a different spacecraft bus manufacturer and a very different set of payload transmitters as compared to XM-7 here.

However, failures like this underscore something that is not entirely obvious to those unfamiliar with modern GSO satellites: these birds fold up nice and compact for launch but they unfold like a butterfly emerging from a chrysalis once in space. There are truly enormous PV arrays and a complicated array of high-gain TTC antennas; uplink receiver antennas; and re-transmission antennas and RF waveguides, plus all the internal connections between the above; as well as internal thermal control systems to keep the electronics operable, which typically include radiators.

There's a lot going on during orbit-raising and then on-station checkouts. It's entirely conceivable something deployable on the bird got stuck and didn't deploy properly, or that some system failed during checkouts because of a pre-existing flaw that the manufacturer thought (and hoped!) it had addressed prior to launch. It's doubtful anyone not on the Boards of Directors or executive committees of the companies involved, and their insurers, will know the details any time soon.

Once any claims are made and resolved - whether that's next month or in several years' time - the issues may become more well-known in the satellite industry as part of some "lessons learned" presentation or seminar materials. But until then, or unless there is a public statement by one of the companies involved, we're all just speculating.