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Launch & Space Liability Insurance Overview
Presentation to COMSTACWashington, DCOctober 30, 2008
Raymond F. Duffy Jr.Senior Vice PresidentWillis [email protected]
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Insurance coverages for space activities
• Asset coverage (i.e., launch and in-orbit insurance)
- Covers owner or operator of a launch vehicle or satellite against loss of the physical asset due to physical loss, damage or failure
- Insured value for satellite replacement cost (satellite + launch + insurance cost) typically $150-250 million
- Market annual premium typically $700-800 million
• Liability coverage (i.e., launch and in-orbit liability insurance)
- Covers owner or operator of a launch vehicle or satellite against claims by third parties for bodily injury and property damage
- Limits of insurance policies typically ≤$500 million for large launch vehicles
- Market annual premium typically <$20 million
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Space liability - historical developments
• In 1984, after Challenger and the discontinuation of commercial shuttle flights, a U.S. Government Presidential mandate was issued to promote competitiveness of the U.S. launch industry by making U.S. Air Force launch facilities available for commercial launches.
• More recently, Congress mandated fiscal responsibility for the launch industry. Government entities began efforts to reallocate launch risks to the commercial sector.
• Aviation products liability insurers generally provide space liability insurance.
• Liability coverage for a launch failure would arise out of the launch liability or products liability insurance policies.
• Total annual worldwide launch and in-orbit liability premium is less than $20 million.
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U.S. Government Launches
• Viewed as a procurement under the Federal Acquisition Regulations
• Responsibility (“care, custody and control” = CCC) was thought to pass to the Government at the manufacturing site or when the vehicle arrived at the launch site
• Some policies “deemed” launch vehicles and spacecraft products not to be in the CCC of the insured upon arrival at the launch site
• Responsibility for damage to Government property was assumed to remain with the Government (e.g., Air Force or NASA)
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Launch and in-orbit liability coverage issues
• Available limits- Launch and in-orbit: ≤$500,000,000
• Launch- Multiple parties involved in process
• Inter-party liability
- Third-party liability concerns
- US Government reluctance to provide indemnification
• e.g., NASA Constellation program (Ares/Orion)
- Liability for post-accident clean-up costs
• In-orbit- Non-coordinated satellites / frequency interference
- Co-located satellites
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• Commercial Space Launch Act (CSLA)- Applies to commercial launches only
- Governs licensed launch activities• “Launch” includes the flight of a launch vehicle and pre-flight ground operations beginning with the arrival
of a launch vehicle or payload at a U.S. launch site and ending for ground operations when the launch vehicle leaves the ground, and for flight after the licensee’s last exercise of control over the launch vehicle.
• Provided in lieu of PL 85-804
• Excess of MPL (Maximum Probable Loss) as advised by FAA
• Flow-down…all parties are protected
• PL 85-804 (Ultra-Hazardous Indemnification) - In the past PL 85-804 has usually been given by U.S. Government
• If PL 85-804 is not granted, Government would pay for insurance or increased limits of insurance already in place
• Excess of insurance or in lieu of insurance
• Current trend is for the government to try to pass this risk to the supplier and not provide 85-804
• Occurs most often for launches the Government believes are of a less-hazardous nature
• NASA Space Act Agreements• Provided in lieu of PL 85-804
• Excess of MPL (Maximum Probable Loss) as advised by NASA
• No flow-down…each contractor has to have its own Space Act Agreement
• Insurance market has been able to work in conjunction with these programs to successfully tailor coverage to needs of launch operators
Historical approach to launch and in-orbit liability issues
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Manufacturers in-orbit liability coverage issues
• Available limits: Up to market capacity (currently ≤$2,000,000,000)
• In-orbit satellite failures arising from products defects have increased.
• Strength of contractual indemnifications between satellite owners and manufacturers has increasingly been tested by insurers who have paid asset claims to satellite owners for these failures.
• Currently subrogation is proceeding where owners’ insurers are trying to recover from a manufacturer due to negligence.
• In a recent case, court arbitration found operator did not properly inform insurers before the loss, so insurers did not have to pay claim.
• Future problems with satellite product defects will continue to keep the issue on the table.
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Foreign Commercial Launches
• Arianespace- Provides coverage to its customers and subcontractors for approx.
€61,000,000
- Unlimited government indemnification in excess of insurance
- Availability of the indemnification has never been tested
- Process is transparent for the customer
• Chinese and Russian launches- Typically provide coverage for a limit of $300,000,000
- Government indemnification may be available excess of insurance
- Coverage for subcontractors, customers, and satellite manufacturers is sometimes provided
- Liability standards are not as burdensome as in the U.S.
• Japanese launches- Typically provide coverage for a limit of ¥20,000,000,000
• All of these programs essentially mirror the CSLA
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Conclusion
• Sufficient aerospace liability insurance capacity exists today to provide coverage for government and commercial launches.
• Insurers will also be able to provide launch liability coverage for new emerging launch vehicles and space operations.
• Insurers look for CSLA indemnification, PL 85-804 designation, NASA Space Act protection, and other limitation of liability clauses.
• Due to the low annual market premium for space liability, a significant insured loss will be subsidized by premium from other lines of insurance business
• As a result of a loss, the market would likely experience:
- Significantly increased pricing
- Potential withdrawal of indemnification and other limitation of liability extensions from the Government.
- Reduction or withdrawal of coverage by insurers
