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Launch & Space Liability Insurance Overview Presentation to COMSTAC
Washington, DC October 30, 2008 Raymond F. Duffy Jr. Senior Vice President Willis Inspace
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Insurance coverages for space activities
Asset coverage (i.e., launch and in-orbit insurance) Covers owner or operator of a launch vehicle or satellite against loss of the physical asset due to physical loss, damage or failure Insured value for satellite replacement cost (satellite + launch + insurance cost) typically $ million Market annual premium typically $ million Liability coverage (i.e., launch and in-orbit liability insurance) Covers owner or operator of a launch vehicle or satellite against claims by third parties for bodily injury and property damage Limits of insurance policies typically ≤$500 million for large launch vehicles Market annual premium typically <$20 million
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Space liability - historical developments
In 1984, after Challenger and the discontinuation of commercial shuttle flights, a U.S. Government Presidential mandate was issued to promote competitiveness of the U.S. launch industry by making U.S. Air Force launch facilities available for commercial launches. More recently, Congress mandated fiscal responsibility for the launch industry. Government entities began efforts to reallocate launch risks to the commercial sector. Aviation products liability insurers generally provide space liability insurance. Liability coverage for a launch failure would arise out of the launch liability or products liability insurance policies. Total annual worldwide launch and in-orbit liability premium is less than $20 million.
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U.S. Government Launches
Viewed as a procurement under the Federal Acquisition Regulations Responsibility (“care, custody and control” = CCC) was thought to pass to the Government at the manufacturing site or when the vehicle arrived at the launch site Some policies “deemed” launch vehicles and spacecraft products not to be in the CCC of the insured upon arrival at the launch site Responsibility for damage to Government property was assumed to remain with the Government (e.g., Air Force or NASA)
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Launch and in-orbit liability coverage issues
Available limits Launch and in-orbit: ≤$500,000,000 Launch Multiple parties involved in process Inter-party liability Third-party liability concerns US Government reluctance to provide indemnification e.g., NASA Constellation program (Ares/Orion) Liability for post-accident clean-up costs In-orbit Non-coordinated satellites / frequency interference Co-located satellites
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Historical approach to launch and in-orbit liability issues
Commercial Space Launch Act (CSLA) Applies to commercial launches only Governs licensed launch activities “Launch” includes the flight of a launch vehicle and pre-flight ground operations beginning with the arrival of a launch vehicle or payload at a U.S. launch site and ending for ground operations when the launch vehicle leaves the ground, and for flight after the licensee’s last exercise of control over the launch vehicle. Provided in lieu of PL Excess of MPL (Maximum Probable Loss) as advised by FAA Flow-down…all parties are protected PL (Ultra-Hazardous Indemnification) In the past PL has usually been given by U.S. Government If PL is not granted, Government would pay for insurance or increased limits of insurance already in place Excess of insurance or in lieu of insurance Current trend is for the government to try to pass this risk to the supplier and not provide Occurs most often for launches the Government believes are of a less-hazardous nature NASA Space Act Agreements Excess of MPL (Maximum Probable Loss) as advised by NASA No flow-down…each contractor has to have its own Space Act Agreement Insurance market has been able to work in conjunction with these programs to successfully tailor coverage to needs of launch operators
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Manufacturers in-orbit liability coverage issues
Available limits: Up to market capacity (currently ≤$2,000,000,000) In-orbit satellite failures arising from products defects have increased. Strength of contractual indemnifications between satellite owners and manufacturers has increasingly been tested by insurers who have paid asset claims to satellite owners for these failures. Currently subrogation is proceeding where owners’ insurers are trying to recover from a manufacturer due to negligence. In a recent case, court arbitration found operator did not properly inform insurers before the loss, so insurers did not have to pay claim. Future problems with satellite product defects will continue to keep the issue on the table.
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Foreign Commercial Launches
Arianespace Provides coverage to its customers and subcontractors for approx. €61,000,000 Unlimited government indemnification in excess of insurance Availability of the indemnification has never been tested Process is transparent for the customer Chinese and Russian launches Typically provide coverage for a limit of $300,000,000 Government indemnification may be available excess of insurance Coverage for subcontractors, customers, and satellite manufacturers is sometimes provided Liability standards are not as burdensome as in the U.S. Japanese launches Typically provide coverage for a limit of ¥20,000,000,000 All of these programs essentially mirror the CSLA
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Conclusion Sufficient aerospace liability insurance capacity exists today to provide coverage for government and commercial launches. Insurers will also be able to provide launch liability coverage for new emerging launch vehicles and space operations. Insurers look for CSLA indemnification, PL designation, NASA Space Act protection, and other limitation of liability clauses. Due to the low annual market premium for space liability, a significant insured loss will be subsidized by premium from other lines of insurance business As a result of a loss, the market would likely experience: Significantly increased pricing Potential withdrawal of indemnification and other limitation of liability extensions from the Government. Reduction or withdrawal of coverage by insurers
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