The market for insuring satellites in orbit has seen many developments, but space itself continues to be a challenging environment. The satellites we launch to space must survive years of intense solar radiation, damaging vacuum conditions and temperatures ranging from minus 150C to plus 200C. This means that sometimes – despite careful design, highly-regulated manufacturing, and stringent testing - parts can fail.
Indeed, that is why space insurance – as a class – is recognized as a crucial risk mitigation measure, not only for satellite operators and manufacturers but also for those seeking finance for new space missions. When you consider that a single communications satellite can generate $100-200m a year in revenue – potentially repeated across a fleet of up to 30 spacecraft - the advantage of placing insurance to cover lifetime in orbit becomes clear.
The challenges
Although space insurance may seem like a new concept, it dates back to 1965 when the first policy was issued for the Intelsat I satellite. It was restricted to Third Party Liability and Pre-Launch risks, but it marked the beginning of a specialized space insurance market.
The field has developed over the past six decades to meet the requirements of satellite operators and has reached a certain level of maturity. However, the space insurance market is continually faced with two major issues: the relatively small statistical sample and the pace of technology development. The first is a result of the simple fact that the number of insurable satellites compares miserably with, for example, the much larger number of Airbus A330s or Boeing 737s in operation. The constant desire to innovate is a natural process in any field of engineering endeavor, but it doesn’t sit well with an underwriting focus on equipment heritage and reliability.
The overall result is a volatile market in which a couple of major claims can decimate a year’s premium income. For example, in 2023/24 claims have greatly exceeded premiums and rates have risen dramatically as a result.
An inherent problem with satellites is the relative inaccessibility of their operating environment. Most communications satellites are stationed 36,000km above the Earth’s surface, which means that if anything goes wrong, we cannot simply send a maintenance crew to fix it. However, this is where technology development may come to the rescue - in the form of a suite of technologies collectively termed in-orbit servicing (IOS).
Orbital repair
A number of space agencies and industry contractors are currently expanding the envelope of space operations by developing spacecraft to dock with and take control of satellites. The aim is to extend satellites’ operational lifetimes. This has already been demonstrated by Northrop Grumman, Astroscale and others. Meanwhile, other vehicles that resupply a satellite’s maneuver propellant are being tested.
The ultimate intention is that specialized ‘space tugs’ with robotic manipulators will be able to readjust or replace some failed components, many of which will be produced in space by 3D printing and other manufacturing techniques. This would go some way towards normalising space insurance in comparison with other classes.
The hope is that being able to fix a problem in orbit, rather than making a claim for the entire cost of a disabled satellite, will dramatically reduce claims costs (especially since replacing a large satellite can cost hundreds of millions of dollars). This, in turn, would reduce the overall volatility of the space market and potentially attract other insurers, thereby enhancing market capacity.
Lockton Space
There are quite a few ‘technological ducks’ to get in a row before we can declare the satellite-repair problem ‘solved’, but the promise of in-orbit servicing is galvanizing the space insurance community, not least Lockton’s new Space team, based in London.
In fact, the team is looking even further ahead, as the space industry develops commercial space stations in low Earth orbit and conducts a structured return to the Moon for both automated spacecraft and crewed missions. If the often-discussed concept of lunar mining is to become reality, it will require communications and navigation satellites in lunar orbit (like the ones we have around the Earth) …and they will require insurance.
The space insurance market has never been shy of a challenge - and the next few years will test its resolve to the limit – but the team at Lockton Space looks forward to this new opportunity.
For further information, please contact the author of this article or your Lockton representative.
