Focus: Launching into space? Not so fast. Insurers balk at new coverage
01/09/2021 11:00
By Noor Zainab Hussain and Carolyn Cohn
Sept 1 (Reuters) - An ever-swelling amount of space debris
is threatening satellites that hover around Earth, making
insurers leery of offering coverage to the devices that transmit
texts, maps, videos and scientific data, industry sources said.
Thousands of new satellites are being launched into areas
where orbital rubbish has been accumulating since early space
missions nearly 65 years ago. The surging collision risks have
left the handful of insurers that offer satellite coverage
pulling back or exiting the market, executives and analysts
said.
"This is a real issue for insurance," said Richard Parker,
co-founder of Assure Space, a unit of AmTrust Financial.
Over a year ago, the company stopped providing spacecraft
insurance in the Low Earth Orbit (LEO) where most satellites
operate. The few policies it has sold since then exclude
collision damage.
"It may start to get difficult to get that type of coverage
in the near future as more insurers realize that this is a
significant risk that we can't even get our arms around," Parker
told Reuters.
There are 8,055 satellites roaming Earth's orbits, 42% of
them inactive, according to Seradata, which tracks the
statistics. Most operate in the LEO, which extends 2,000
kilometers, or 1,243 miles, beyond Earth.
The number of active satellites has jumped 68% from a year
ago and more than 200% from five years ago.
Much of the new activity has come from billionaire Elon
Musk's SpaceX, as it expands its Starlink broadband network.
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SpaceX did not reply to requests for comment. As a privately
held company, it does not disclose whether its satellites are
insured.
Other major companies including Google, Apple and Amazon
also rely on satellites to transmit data, as do telecom
providers, government agencies and universities working on space
research, insurance sources said.
Space coverage has been a lucrative niche for insurers,
which took in $475 million in gross premiums to cover
satellites, rockets and unmanned space flights last year and
paid just $425 million in losses, according to Seradata.
Space premiums are 10-20 times aviation premiums, said Peter
Elson, CEO of insurance broker Gallagher Aerospace.
"This is a risky business in the first place,” he said.
MESS IN SPACE
The insurance dilemma underlines a greater problem: no one
is cleaning up the mess in space.
Government agencies track thousands of pieces of debris,
including inside a "graveyard orbit" where old geostationary
orbit (GEO) satellites are sent to die with their last bits of
fuel, 36,000 kilometers, or 22,370 miles into space.
LEO satellites are much smaller than GEO satellites.
Typically the size of a small refrigerator, they need $500,000
to $1 million worth of coverage, far below the $200 million to
$300 million for those in the GEO, industry experts said.
Historically, policies have protected devices against loss,
failure or damage from launch through their orbiting life, but
not revenue losses from outages. Operators could add liability
coverage in case one satellite damages another or re-enters the
atmosphere in a way that causes damage or injury on the ground.
About half of new satellite launches now have insurance,
said Denis Bousquet, an executive in AXA XL’s space business.
Industry sources expect more policies to exclude collision
coverage and fewer satellites to have insurance at all.
"The concentrations of debris and increasing numbers of
satellites being deployed are increasing the potential for
collision," said Charles Wetton, underwriting manager for space
policies at insurer Global Aerospace.
DEBRIS GRAVEYARD
Only 11 spacecraft have suffered a partial or total failure
due to suspected debris strikes over the past decade, according
to Seradata, making insurer worries largely theoretical for now.
Yet because insurers predict risks over the life of current
and future policies, space underwriters fret over doomsday
scenarios years ahead.
Wetton cited the possibility of a "Kessler effect," named
for NASA space debris expert Don Kessler who developed the
theory in 1978. It anticipates LEO becoming so crowded that
there is a cascade of collisions.
There are no signs such a situation is imminent, but it
would render entire orbits uninsurable, Wetton said.
Assure Space's Parker said he is confident a major collision
will occur within the next three years, rendering insurance
nearly impossible to obtain.
New insurers may enter the market to alleviate supply-demand
strains. Until then, industry experts said companies,
universities and government agencies will likely bear more
financial responsibility.
Taxpayers also may also end up on the hook more often.
In June, the Export-Import Bank of the United States (EXIM),
approved $80.7 million in financing for a SpaceX launch as well
as a launch and in-orbit insurance for Spanish communications
network Hispasat SA.
"The availability of EXIM's financing enables SpaceX and
other U.S. exporters to remain competitive," said EXIM Acting
First Vice President and Vice Chairman James Cruse.
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Operational satellites http://graphics.thomsonreuters.com/14/satellites/index.html
FOCUS-Bezos' 2021 Space Odyssey a risk too far for insurers
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BILLIONAIRE ELON MUSK'S SPACEX IS SENDING HUNDREDS OF NEW
SATELLITES TO ORBIT BILLIONAIRE ELON MUSK'S SPACEX IS SENDING
HUNDREDS OF NEW SATELLITES TO ORBIT https://tmsnrt.rs/3gCSZU0
SATELLITES ROAMING EARTH'S ORBITS https://tmsnrt.rs/3ysSUsg
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(Reporting by Noor Zainab Hussain in Bengaluru and Carolyn Cohn
in London and additional reporting by Eva Mathews; Graphic by
Subrat Patnaik
Editing by Lauren Tara LaCapra and David Gregorio)
((noor.hussain@thomsonreuters.com; Within U.S. +1 646 223 8780;
Outside U.S. +91 80 6182 2663 or +91 80 3796 2663 ;))