Failure in orbit: Planning your space projects with space insurance in mind

Global network and satellite data exchange pictured against the Earth at night.

Is the sky the limit for space insurance?

2023 may be a year no space insurer wishes to repeat, with the space insurance market experiencing some of the biggest losses in two decades.

This period of record losses may prompt several insurers to consider withdrawing from the sector.1

Space needs a sustainable insurance industry. If the space insurance market shrinks, space companies will continue to face challenges in obtaining space insurance with potentially skyrocketing premiums (no pun intended).

This article explores the losses the space insurance industry has seen in the last 12 months that have impacted its capacity, and factors for space companies to consider when planning space projects with space insurance in mind.

What happened?

There are expected to be two massive claims this year.

First, the ViaSat-3 F1 Americas satellite (owned by satellite operator Viasat, Inc.), launched in April, suffered a problem deploying its main antenna while in orbit. That antenna was provided by a third-party supplier and described by Viasat as "exceptionally large" for a commercial broadband satellite, which was the first of a planned three-satellite high-capacity global constellation that was expected to increase the coverage and capacity of Viasat's broadband network.

The ViaSat-3 F1 Americas satellite is insured for US$4212 million across a number of policies and insurers,3 which is more than half of its reported mission costs of approximately US$700 million (including launch, insurance and ground equipment costs).4

Second, the communications satellite Inmarsat-6 (I-6) F2, launched in February, experienced an "unexpected anomaly" with its power subsystem while further raising its orbit post-launch. The satellite was the second in a planned two-satellite constellation, intended to add further capacity to Inmarsat's global communication services. That anomaly could end the satellite's useful life,5 which was intended to be 15 years.6

The Inmarsat-6 (I-6) F2 satellite is insured for US$349 million,7 and is ultimately owned by Viasat.

Viasat has made claims under its space insurance policies and expects to recover less than 10% of the planned communications capacity on the ViaSat-3 F1 Americas satellite. It plans to finalise insurance claims for both satellites before the end of 2023.8

On top of the Viasat claims, there are reports of a number of other claims including:

  • US$50 million in claims relating to propulsion issues on four geostationary orbit (GEO) satellites;9
  • US$40 million for the satellite Arcturus from startup Astranis relating to solar array issues; and
  • around US$25 million for the total failure in orbit of Azersky/Spot-7, Azerbaijan's first Earth observation satellite.10

The combined claims reportedly of at least US$883 million are expected to exceed the premiums received by space insurers in 2023, estimated by Seradata to be US$500 million for the year due to launch delays.11 While this follows a profitable year for the space insurance market in 2022,12 with losses in 2023 expected to be at least twice as large as the profit earned in 2022, space insurers will still end the year in the red.

When massive losses have occurred in a line of insurance, it often results in insurers exiting or considering an exit from that sector. For example, American International Group Inc., Swiss Re AG, and Allianz SE left the satellite insurance market following claims made in 2019 that totalled approximately US$788 million, which dwarfed the $500 million premiums for that year.13

Such events tend to cause a significant effect on the space industry as a whole, given insurance premiums are expected to rise to offset losses, as illustrated by the large increases following the losses in 2019. This is particularly so where the pool of insurers and their capacity and appetite for risk shrinks.14 Satellites or projects that are seen as risky, complex or challenging are likely to face higher premiums or restricted coverage, should an insurer decide to insure that satellite or project.15

This in effect leaves the burden of shouldering the risk of satellite launches and rocket launches, or any other space projects, on space companies themselves. In fact, beyond Australian legal requirements to obtain certain third-party liability insurance, many companies operating in space are not insured for their in-orbit activities due to the high cost.

That said, the space insurance market, while volatile, is quite cyclical. Insurance premiums in 2022 were reported to have fallen back down to pre-2019 levels, being approximately 5-20% of policy value,16 and remained stable in 2023.17 However, that may be set to change in light of these potential claims, with reports that some insurers view low single-digit rates as a percent of payload value being unsustainable, and some underwriters already increasing rates across the board.18

What should space companies think about when considering space insurance needs?

Having space insurance may be a key risk management consideration for some space companies on certain projects. Factors for space companies to consider before commencing a space project include the following:

Cost margins

Customers and potential customers of space insurance would be wise to build additional margins in their costings to deal with insurance rate volatility, noting that rates for the renewal of on-orbit coverage for satellites already in space are likely to have increased in the meantime.19

Satellite reliability

Satellite reliability is an important rate determinant for space insurers.20 Space insurers are generally less inclined to insure small satellites being launched into low Earth orbit (LEO) because21 the technology involved tends to be untested or more experimental than the larger satellites launched into the higher-altitude geostationary orbit (GEO). Further, most launched objects - whether operating or non-operational satellites, or other orbital debris - are located within LEO, which presents further risks that are assessed by the insurer, such as collision risks.

Risk transfer

While many companies seek to manage risk by transferring this contractually, this may not always be possible or sufficient in considering whether to obtain space insurance beyond any legal requirements. For example, holders of a permit or authorisation for a launch or return of a space object under the Australian Space (Launches and Returns) Act 2018 (Cth) (Act) may wish to also obtain in-orbit insurance for failure of the satellite in orbit, in addition to the launch insurance required under the Act which is concerned with third-party liability rather than first-party commercial loss.

Risk areas

Key risk areas that space insurers tend to focus on when considering whether or not to underwrite a space risk include:

  • heritage and in-orbit reliability of satellite hardware;
  • flight history of the launch vehicle for launch risks;
  • design redundancies and margins;
  • the amount of insurance; and
  • the insured's approach to risk management and manufacturer technical oversight.22

As these factors are likely to influence the availability of insurance offered and the premium, it would be prudent for a company that starts a new space project to consider these factors in their decision-making, including in planning and designing the mission, and the technical and design details of the satellite and launch vehicle used.

Collision risk

Collision risk is an increasing focus for space insurers. While technical risks relating to the potential failure of a satellite in orbit has traditionally been the main concern (and cost driver) for space insurers, this is slowly shifting given the increasing congestion of space, which will amplify the risk of collisions with debris and other satellites. Space companies should therefore expect insurers and institutional investors such as banks to step up their due diligence when actively managing and safeguarding their mission from a space debris and orbital safety standpoint.

With long-term sustainability in mind beyond the requirements of these commercial stakeholders, space companies are recommended to consider a number of different tools and services in their approach to collision risk management. For example, this could include adding sufficient propulsive capability to satellite projects, obtaining space situational awareness tools to better understand and monitor potential collision risks and, as the technology develops, considering on-orbit servicing or life-extension services for satellites while in orbit as well as active debris removal services to mitigate in-orbit collision and liability risks.

Dealing with any of these matters, for example by adding safeguards and redundancies in space projects, is likely to come with additional cost. Space companies should consider these and the resultant costs at the start of the project, balanced against the potential down the line for higher insurance premiums or more narrow insurance coverage offered (if any) by an insurer.

For now, given the current space insurance claims climate, space companies wishing to obtain space insurance may also wish to consider the relevant market conditions when timing their projects.

Joann Yap is a Senior Associate in Lander & Rogers' Corporate team and Director and Chair of the Space Law Council of Australia and New Zealand. For questions or assistance in relation to space law and commercial contracting, or space legal due diligence and strategy, please do not hesitate to contact Joann Yap on or +61 2 8020 7719.












12 As indicated by Seradata's reports, there were losses of approximately US$356 million in 2022 compared to an estimated gross premium income of approximately US$550 million.











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