As we enter a new frontier of space development, the insurance industry plays a key role in propelling space efforts.
Considering that a typical telecommunications satellite in geostationary orbit costs around $200 million and launching it into its own orbit costs an additional $100 million, space insurance is essential for the financing of space adventures.
Commercial human spaceflight has arrived. Rockets from companies led by Richard Branson, Jeff Bezos and Elon Musk regularly go into space. Massive constellations of low Earth orbit satellites are being built to provide global satellite services.
And new commercial missions are planned to bring humans back to the Moon and explore Mars by the end of the decade. These efforts represent both opportunities and risks for space insurers.
Challenges Facing Space Insurers
To date, most space-related insurance has focused on the satellite services upon which modern life increasingly depends.
In our interconnected and data-driven world, spacecraft are a vital link in telecommunications and internet infrastructure. Satellites enable Internet, television, banking, Earth observation, Global Positioning System (GPS), weather, national defense, and communication between cell towers and networks in remote areas.
With increasing satellite launches driven by demand for high throughput, the need to replace older satellites, and more regular resupply schedules for the International Space Station (ISS), significant opportunities exist for space insurers.
Spacecraft and the rockets that launch them are becoming increasingly complex, as are the business applications that ensure their seamless integration into our daily lives. This, combined with a limited number of launches per year and the possibility of significant losses, makes space insurance one of the most difficult types of insurance to purchase.
In addition, two new issues have a significant impact on the core business of space insurers.
The first is the risk of collision due to an increasing number of objects in low Earth orbit. Deploying over 2,000 satellites for Starlink and OneWeb in an already congested environment containing both active and derelict satellites and rocket bodies has dramatically increased the likelihood of collision. Recent anti-satellite demonstrations have added to the amount of traceable and untraceable debris in these orbits.
A possible regulation of debris in low Earth orbit is conceivable, as space debris could ultimately lead to significant losses for space insurers and limit the use of certain orbits. How it will be cleaned up and who will fund these efforts could affect space assurance in terms of risk analysis and the ability to insure debris removal operations.
Tracking technology, automatic collision avoidance systems, debris removal and in-orbit servicing also have the potential to reduce collision risk.
The second new challenge facing space insurers is the introduction of new launchers. Several companies are currently developing rockets, both small and large.
For these vehicles to be commercially successful, they will need paying customers, who in turn will need insurance, for the first flights. Insurers will then have to decide whether to insure the first, second or third launch of a new rocket.
Short-term future projects
The renewed interest in space exploration, as well as the expected rise of the space industry for space (when goods and services are produced in space for use in space) , are fueling a number of emerging space initiatives. For example, NASA is working on several lunar missions in preparation for the return of humans to the Moon by 2024 and the establishment of a potential staging point for travel to Mars.
Many of these missions will be implemented by the commercial space industry. Their goals will include mapping, demonstrating technology, and exploring the moon’s natural resources.
Many other countries are also working on lunar missions; some will orbit the moon, some will land, and some will deploy rovers for detailed exploration. Canopius is already considering space assurance requirements for some or all of these missions.
Space tourism is another new project. In addition to buying a seat on a commercial rocket into space, a private citizen can pay NASA to take a trip to the ISS.
To date, most space tourism has been funded by wealthy individuals who have generally not sought insurance. As new players enter the market, they will need access to both insurance and financing for cutting-edge space projects.
The space insurance industry cautiously welcomes the growth of commercial space businesses. New launch vehicles, new satellite technologies and ambitious space missions require careful analysis of hardware design, manufacturing and testing.
Underwriters should be comfortable with the legacy, margins and redundancy of these programs. Political expertise is needed to ensure coverage is appropriate and addresses all potential scenarios. Financial modeling of individual space insurance risks and the overall space portfolio is necessary to calculate premium, establish strategy and guarantee results.
Long-term space efforts
Much excitement in the space industry stems from innovative ideas that go far beyond the boundaries of traditional space exploration or commercial use of satellites.
Many space-related entrepreneurial business opportunities are being explored. Some of these include sending objects into space for the sole purpose of increasing their value once back on Earth, the increasing use of Earth observation combined with artificial intelligence, assembling spacecraft with components already in space, expanding the Internet of Things, and mining asteroids for materials. to build habitats or supply stations.
Indeed, a boom in the space economy for space is not only possible, it is expected. It may soon be possible to assemble commercial satellites in space, further reducing launch risks and costs. Again, insurers will facilitate these opportunities by providing cover for the physical loss of the assets involved, likely a prerequisite for securing funding.
Changing legislation opens up the possibility of additional space-related risks and resulting insurance implications. Increased regulation of the commercial space industry is imminent as the congressionally mandated learning period for space travel ends in 2023.
The commercial space industry, concerned about onerous regulations that are slowing progress in space travel, may be in direct opposition to members of Congress who believe that space travel should be regulated like commercial aviation.
Space insurance is important for existing and future commercial space ventures. It provides financial protection to current satellite operators, new entrepreneurs and investors in an industry facing significant potential losses due to in-orbit collisions, launch vehicle or spacecraft failures and loss of life.
If insurers pull out of space by reducing exposures or coverage, or dramatically increasing premiums, the effect will be felt throughout the space industry. &