Start-ups have recognised the excitement and opportunity of ‘NewSpace’ for many years, and the commercial space sector has benefitted as a result. Launch services, satellite broadband, space stations, in-orbit servicing and debris removal are just some of the business segments that stimulate the current space sector.
But excitement is not without challenge, and opportunity is not without risk – which makes a robust insurance programme essential.
Risk mitigation
All space ventures are based on complex technologies – it’s part of their DNA – but the space industry’s decades of experience have engineered a balance between risk and reward. Start-ups are often pioneers of new and innovative ideas, but they lack this level of heritage.
This presents several challenges for start-ups, which may struggle with contracts and regulation, encounter issues in development and testing, and suffer difficulties with funding and investment. Moreover, while a concept may be technically brilliant – even unique – success in an increasingly competitive market is not guaranteed. Investors expect businesses to demonstrate a clear route to monetisation and a good grasp of risk mitigation.
This is where a space insurance broker can help.
Role of insurance
In general, insurance is a valuable tool for a formative business, providing protection against risks such as property damage, liability claims and employment issues. It helps to ensure that setbacks don’t derail operations, and it gives investors and other stakeholders a demonstration of organisational resilience.
As projects mature, coverage evolves into specialist policies for manufacturing, assembly and testing. For the space industry, this culminates in coverage for spacecraft integration, launch and in-orbit life.
However, procuring insurance is far from ‘first priority’ for most space startups. Founders and entrepreneurs are understandably focused on the tech, the money, and their future market. With the need to juggle multiple priorities, it’s no surprise that insurance can slip down the list.
Initial guidance
Fortunately, there are practical steps that start-ups can take to improve their chances of securing coverage and achieve optimal terms:
Demonstrate reliability and heritage – insurance underwriters are reassured by proven spacecraft components, subsystems with flight history, or technology that has already been tested in similar environments. Proven heritage reduces perceived risk and creates a pragmatic path to early success.
Show financial discipline – start-ups should be transparent in budgeting, have a robust plan for managing cash flow and provide clear evidence of investor backing.
Highlight risk management practices – underwriters want confidence that businesses can support their risk mitigation strategy. Evidence to strengthen the case for cover can be provided by documenting test protocols, quality assurance measures and contingency planning.
Communicate your business case – beyond the technology, insurers want to understand how the venture makes money. A clear route to market, realistic timelines and differentiation in a crowded field help demonstrate viability and reduce perceived exposure.
Engage brokers and insurers early – insurance is a people-business, so beginning a conversation at an early stage builds trust and demonstrates credibility. It also avoids last-minute negotiations that can weaken terms. Given the complexity of space coverage, expert guidance is essential.
Talk to us
For space start-ups, navigating the insurance market is no easy feat. Lockton has extensive experience in helping start-ups to overcome some of the inherent challenges of the space business, from advice on contracts, policies, and how to engage with the insurance community, to obtaining the required coverage for an affordable premium.
Our specialists work closely with entrepreneurs to bridge the gap between innovation and insurability – helping them to secure the coverage they need to move confidently through development, launch and beyond.
For more information, reach out to a member of our space team.
