Are insurers ready for the British space age lift-off?

Space is getting very busy… not with the vanity flights of super-rich celebrities, but with thousands of new low-orbit satellites.

In the past two years the number of satellites orbiting the earth has doubled, with more than 7000 now constantly overhead. Surprisingly, it is estimated that only about 300 of them are fully insured commercially.

There are several reasons for this. Many of the older, large geo-stationary satellites were launched and owned by governments, often for defence purposes, so they are self-insured.

Some were launched before the implementation of United Nations conventions requiring insurance, which now require a minimum of third party liability cover for launch and de-orbiting activities.

This is all many operators take out, often with the backing of national governments. Once a satellite reaches the end of its active life – usually after 25 years – the responsibility for it reverts to the launch state.

Even the huge growth in the number of satellites in recent years has not seen a rush to the commercial insurance market.

The much smaller, low-orbit satellites that form the basis of the new generation of satellite constellations – such as Starlink, which is operated by Elon Musk’s Space X – are interlinked, meaning the failure of one satellite can be easily covered by the next one in the constellation.

“If you are launching so many satellites, then insurance is probably not the best risk transfer mechanism,” says David Wade, space underwriter at Lloyd’s-based Atrium Space Insurance Consortium.

Denis Bensoussan, head of space at Beazley, echoes that view: “Most of the new players don’t have the same approach to insurance as legacy players. They are experimental, trying new technologies. Insurance is an afterthought."

He says as those businesses mature, insurance will become more important.

“When there is no immediate revenue there is less need for insurance but now some of those businesses are maturing and generating revenues they are at a point where they are willing to protect their assets and their revenues," Bensoussan notes.

Only the beginning

This is far from the end of the challenges underwriters face when these new operators start to worry about insurance.

“We have to deal with small operations who are used to buying insurance so there is a lot of education to be done,” says Bensoussan. “We have to evolve our products and coverage, in particular to offer a more streamlined option as they don’t need the same comprehensive cover as the legacy players."

As the number of satellites in orbit grows, the range of uses they are put to is undergoing a transformation.

We are on the cusp of manufacturing in space, where the lack of gravity and constant low temperatures could revolutionise the production of new alloys, microchips, and pharmaceuticals.

Drugs to treat diabetes are notoriously tricky to manufacture because of the different densities of the ingredients – a problem that weightlessness eliminates.

Some scientists have talked about the potential to produce millions of new alloys, many of which could be used to produce a new generation of microchips.

The search for renewable energy sources has also reached space. Earlier this year, the UK Space Agency announced it is backing a new project for developing space-based solar power by British firm Satellite Applications Catapult.

This is a long-term project as one space-based solar power station will require 68 launches to construct, but will run for 25 years once it is operational.

These developments will test the willingness of underwriters to accept risks for which little or no data is available.

Neil Stevens, senior vice-president at Marsh Space Projects, is confident the market will rise to that challenge. He says: “The insurance market has always been very positive in supporting innovation in space. There are a lot of very creative insurers and they are always prepared to take on challenges and be creative in finding solutions.” 

Among the leading firms exploring the manufacturing opportunities is Cardiff-based Space Forge. The business plans took a significant knock in January when one of its satellites was on Virgin Orbit’s Cosmic Girl, a former Virgin Atlantic Boeing 747, which took off from Spaceport Cornwall at Newquay.

After taking off, the Virgin Orbit plane flew to 35,000ft over the Atlantic Ocean, where a launch “anomaly” forced it to jettison the rocket containing nine small satellites, which now sit at the bottom of the Atlantic off the Azores. Cover for this was placed with Beazley by Marsh. It was a reminder that launch vehicle failure is the largest source of claims faced by space underwriters.

The space insurance market has taken these losses in its stride, says Wade, because it has worked hard to understand the risks.

Wade says: “We can’t rely on statistics because there is no data, so we need the engineering knowledge. This is where working with the satellite developers comes in. We have worked with innovations so we have a very good understanding of the risks.”

Launch risks are an obvious hazard, especially as most launch sites – including the seven being developed in the UK – are being used by multiple operators.

The coverage for the facilities and the ground personnel is treated in much the same way as for conventional airports, with major aviation insurers such as Global Aerospace leading the way.

The satellite operators require licences issued by state regulators – the Civil Aviation Authority in the UK – and to obtain these, the operators must demonstrate they have the minimal third party cover in place, usually at a fixed limit of €60m (£53.05m).

In the UK, the government is pressing for more extensive requirements, including for in-orbit operations and recovery of redundant satellites by establishing a new space sustainability standard.

It is also looking for greater flexibility in the amount of coverage required, says Stevens: “There is a bit of a one-size-fits-all about the current regulation. There is potential for reform.”

Wild West space race

Lloyd’s underwriters are especially keen to back the scheme to manage the huge increase in space debris, and recently welcomed the UK science minister George Freeman to the market’s Lime Street headquarters to advance this.

“A Wild West space race without effective regulation risks a growing crisis of debris in space, adding to the existing threat from 400 redundant satellites and a million pieces of debris,” says Freeman.

“To harness space for sustainability, we need an agreed framework of standards for measuring and managing debris, improving satellite repair and retrieval, and kite-marking genuinely sustainable supply chains."

Wade says there is a lot of concern about the amount of space debris crashing into other debris or operational satellites as "it is almost impossible to ascertain who owns” it.

Underwriters will also be watching the development of the Japanese ELSA-d project, the world’s first commercial end-to-end debris removal operation, although this has stalled after some initial test flights in 2021.

Coming along behind this huge diversification in satellite technology will be the development of manufacturing plants on the moon, especially if the pilot projects on satellites are successful.

This could see space vessels carrying hundreds of passengers travelling back and forth from the moon, requiring a “paradigm shift” in insurance solutions, says Bensoussan.

Musk is looking further afield with a vision for colonising Mars by sending a million people in one thousand starships. He is evasive about the timescale, although has suggested that the first vessel carrying 12 people could be on its way in the next decade.

With the speed of technological development, who is to say this will not be possible? That paradigm shift in insuring the space race might be needed rather sooner than many expect.