Risks emanating from space pose a serious and real threat to the (re)insurance sector. Space debris and satellite collisions have the potential to cause losses in the millions or even billions of dollars, while extreme space weather has the potential to cause systemic failures across the globe. Although both risks are difficult to quantify given the uncertainty involved, (re)insurers have a responsibility to promote risk mitigating measures as the potential costs involved are considerable.
Space Debris Risk
The small number of specialized (re)insurers that provide satellite insurance cover risks during launch, orbit and third-party liability damage caused by the satellite or the launch vehicle. The first two provide insurance cover to satellite operators under the terms of the policy and are often combined to protect them from losses that can occur during the lifespan of the satellite (including loss, damage, malfunction or other defects). Third-party liability insurance, meanwhile, provides liability protection in the event of the satellite being responsible for losses stemming from impacts at launch and collisions during orbit. (1)
While the cost of insuring a satellite during launch has traditionally been higher than its life in orbit, this is likely to change as underwriters become increasingly aware of increased collision risks. Indeed, (re)insurers are already reassessing their potential exposure to satellite collisions in reaction to the elevated risk. The increased likelihood of collisions in the geosynchronous orbit region in particular is causing concern, especially as an increasing amount of high-value satellites are being deployed there while no debris removal mechanism exists.
The high levels of risk associated with the satellite industry require solutions that can meet the challenge of adapting to the rapid development of the space industry. Debris mitigation measures certainly have a significant part to play in driving this development and managing collisions risks. For their part, (re)insurers continue to support the efforts of satellite operators in this regard, enabling them to provide insurance products that evolve with the development of the space industry.
1. Some countries, such as France, require mandatory third-party liability insurance for satellite operators. In addition, low earth orbit operators in the United States must have liability insurance of USD500 million when deorbiting into the Earth’s atmosphere.