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Covering Satellite Risks

In space, scientists investigate the effects that the absence of gravity may have on humans. They gain ever more insight into the universe and the earth’s role in the solar system. Astronauts may grab the headlines, but in terms of traffic, they are easily eclipsed by commercial space travel, especially satellites which are critical hubs of our modern information society. This article outlines some of the challenges of space insurance and space risks, from the pre-launch phases to in orbit operations and satellite insurance.

The challenges of space travel are not only numerous but also sophisticated. For example Ariane V is one of the most reliable rockets so far. It conveys satellites into orbit and supplies the ISS with material by launching the Automated Transfer Vehicle.

Despite numerous successful launches, they are anything but routine. “The biggest difference of space risk in comparison to conventional market segments might be the fact that you can actually watch your future loss live on television,” says Thierry Colliot, Deputy General Manager at SpaceCo, an Allianz Global Corporate & Specialty subsidiary and leader in the space insurance market.

Earthly space travel challenges

In general, different perils of space travel are categorized in ground risks and in-orbit risks. Even before a launch, there are various factors which need to be considered. During their erection and operation, the various production sites and launch facilities are exposed to hazards such as natural catastrophes or fire. Great efforts have to be made by the experts to assure safe procedures, as handled objects are at least delicate or, like explosive devices, also dangerous.

Sophisticated facilities and equipment include spacecrafts, launch vehicles and sterile clean rooms. A lot of details have to work together in an unobstructed progression. There are various complicated operations during pre-launch and launch, including fuelling and commanded launch destruction. As a consequence, any incident can obstruct or delay the whole further operation.

Especially in commercial space missions, delays of a satellite’s service are costly risks whose importance must not be underestimated. Even when the launch is successfully finished, there are still risks of damage, malfunction or total loss during a spacecraft’s operational life. After all, even the failure of a tiny piece of equipment can cause a total loss.

However, losing a spacecraft is by far not the only risk: potential interruptions of a satellite’s service in our globalized world are just as problematic. This is a huge concern for spacecraft users, individual transponder users such as TV channels and Internet providers, but also for banks, car manufacturers and large industries that use telecommunication networks.

Particularly in situations of tremendous public attention, for example during broadcasts like the soccer World Cup Final or the Olympic Games, a malfunction would prove disastrous for commercial revenue and the image of TV stations.

For this reason, global clients and key satellite operators like SES, Intelsat and Eutelsat turn to SpaceCo for its carefully tailored satellite risk management solutions. With more than 150 insured satellites in orbit, liability risks are critical, too. Damage may occur due to liability over the launch of a vehicle, or during in-orbit operations of a spacecraft. These risks include damage to persons or property at a launch site, destruction of a launch vehicle or damage caused to another spacecraft throughout its operational life.

Commercial space launches


Comprehensive approach

Considering the high technological level, the immense financial effort of space transport and the important role of satellites in the telecommunication sector, it is no surprise that its risks must be managed carefully. For example, SpaceCo needs to combine many types of expertise in order to be able to provide proper cover for satellites and space transport.

Space risk management is a very complex discipline. It combines contract analysis and advice, risk evaluation, modeling, insurance program design and implementation, alternative risk transfer concepts, as well as claim negotiation. This meshes well with the integration of SpaceCo into AGCS, which may be the only insurer able to provide the space industry with all lines of business such as property, liability, marine, aviation, alternative risk transfer and dedicated space insurance. Therefore, insurers have to assure a high level of expertise.

Detailed and accurate monitoring is the key to successful space insurance. To achieve approximation of the exact probability of success, insurers contemplate the history of the launchers that are to be insured. In the case of Ariane V, experts evaluate data not only of Ariane V but of all cumulative Ariane experience.

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Space cover begins long before launch.

Sophisticated expertise

It is not only the impressive images of space travel that make its risks unique. If an insured item in orbit is damaged, it is simply inaccessible. It is almost impossible to repair a satellite or to examine closely the reason it failed. In addition, potential losses are severe.

There are about 20 to 30 commercial launches every year (see chart). While a big commercial satellite may cost anything between $300–600m including its launch, the whole premium for space insurance was estimated at about $600m in 2007. As Thierry Colliot puts it, “You can potentially lose the premium of a whole year in one single event.”

Consequently, in order to achieve profitability, the principles of coinsurance and the close evaluation of insurable risks are indispensable for SpaceCo. The overall capacity of space insurance markets was estimated at about $490m for launch risks and $620m for in-orbit risks in 2007. The market situation itself, however, depends mostly on single loss events. A brief look at current developments illustrates this clearly: 2007 witnessed a softening market in the beginning, but two losses in 2007 and another one in 2008 stopped this trend.

Colliot is confident that SpaceCo will continue to play the prominent role it already occupies: “At SpaceCo, we have an authoritative technical approach. Our extensive experience combines expertise in the fields of telecommunication, launchers, insurance and finance. This is maybe the only approach that is so comprehensive.”

Though growth estimates vary considerably according to different studies, with ever growing information networks and new technologies such as HD TV and TV transmission to mobile phones emerging, the number of satellites launches is expected to grow considerably over the next few years. And of course, this will require even more sophisticated risk solutions in the future.

Major types of space insurance products at a glance

  • AIT - Pre-launch insurance protects against loss or damage to the spacecraft and/or the launch vehicle while it is in its manufacturing and testing phase
  • Production Facility and Launch Pad Property - Damage insurance Protects all production sites and launch facilities either during their erection or during their operational phase.
  • In-Orbit insurance - Covers the spacecraft up to the scheduled end of its operational life.
  • Service Interruption/Loss of Revenue/Broadcast Events - In case of extra expenses or loss of revenue incurred if the spacecraft fails to perform to contract specifications.
  • Liability service - Insures against damage due to liability over the launch of a vehicle, or the in-orbit operations of a spacecraft.




Download "Global Risk Dialogue" fall 2008 (1 MB)