Preparing for the worst in the space insurance market

When it comes to space, everything tends to happen on an astronomical scale. And nowhere is this more evident than in the space insurance market.

With approximately 30 satellite launches insured each year, and insurance coverage already provided for about 200 in-orbit satellites, the total insured exposure for these risks is currently in excess of a staggering $25bn.

With this in mind, three analysts from the Atrium Space Insurance Consortium (ASIC) – a leading specialist insurance business founded in 2007 to focus solely on the expanding space insurance market – have published a paper identifying the four main classes of realistic disaster scenarios for the space insurance market, and outlining the rationale behind the selection of each category.


Realistic disaster scenarios – or RDSs – have been developed by insurance market Lloyd’s of London to assist syndicates covering satellites to reserve funds for extreme space events, where an unusual event (e.g. a solar flare) exposes the syndicate to its theoretical worst-case loss.

These RDSs are regularly reviewed and were recently updated to reflect changes within the space industry.

The four classes have been identified as:

  1. An anomalously large solar proton flare affecting many satellites
  2. A generic defect causing undue space weather sensitivity in a class of satellites
  3. A generic defect causing unforeseen failures in a class of satellites
  4. Collision with orbiting space debris in a certain range of orbit altitude

CubeSats in space It is interesting that this was chosen as a breakthrough, because CubeSats – 10cm squared mini satellites – have been sent into space for over a decade. However, 2014 was the year where CubeSats’ potential really started to be realised, and are now being incorporated into significant research projects rather than just being a school research project. For us, one of the biggest uses of CubeSats in 2014 was Outernet, which is bringing a free broadcast-only version of the internet to the world. Although not as wide-ranging as the full internet in content, it will allow highly remote areas to access information that was previously inaccessible.

Before delving into the details or each RDS class, it would be useful to explain the basics of satellite insurance.

A satellite’s operational life can be broken down into two main parts: the launch, and in-orbit operation. The launch risk – which is the highest risk portion – exists for a relatively short period of time compared to the in-orbit life, which could be more than 15 years.

A launch policy usually covers the launch, orbit-raising, in-orbit testing and commissioning into service, plus anything that might go wrong in the first year of the satellite’s life. After this policy expires, owners/operators purchase in-orbit coverage, covering a satellite for the remainder of its life, usually on an annual basis.

Insurance is intended to cover only unforeseen and unforeseeable occurrences (i.e. random failures). As well as launch and mechanical failures, debris or meteoroid strikes and the effects of space weather are all covered under a typical space insurance policy. Acts of terrorism, civil unrest and war are not.

When a review of the space market RDS was undertaken in 2013, Lloyd’s managing agents for space and satellite risks were asked to report on four new RDSs on a trial basis for 2014. These four new RDSs – as outlined above – were adopted from 1 January 2015.

Image courtesy of NASA

Image courtesy of NASA

Large solar proton flares

In general, space weather-related problems result in relatively few insurance claims, because in the majority of cases the anomaly is temporary and has no permanent effect on the operation of the satellite. This is largely because today’s satellites are able to cope relatively well with the oddities of the space environment, without any problems.

The one exception, however, is solar proton flares. These large solar energetic particles are known to universally degrade solar cell efficiency. And one single solar proton flare could result in a large number of satellites losing a portion of their power generating capability, and hence insured capacity.

Generic defect causing undue space weather sensitivity

Although space weather is relatively foreseeable, up to a point, short-term variations and worst-case scenarios are less well defined. This class of RDS is intended to cover the case where a design change or deficiency creates an unexpected sensitivity to one or more kinds of space weather signature, leaving the satellite prone to certain anomalies. These anomalies can range from un-commanded operating mode changes to equipment failures that result in loss of control.

Undetected generic defect

This class of RDS is intended to cover an undetected generic design-related defect that affects a number of already-launched satellites. It can take a year or longer for such a defect to come to light and be identified.

Although the impact of such a defect can vary widely, depending on the size of the satellite and nature of the defect, this could result in significant losses in capability. For example, between 2000 and 2005, insurers were affected by fleet-wide failures due to satellites being launched with undetected generic defects.

Collision with orbiting space debris

The space debris RDS was initially discarded, as the probabilities of collision at the time it was introduced (2005) were not considered to be high enough to be of significant concern.

However, this conclusion had to be reconsidered following a sudden increase in orbiting objects after a Chinese experiment with an anti-satellite weapon in January 2007 caused destruction of the Fengyun-1C weather satellite. This was followed just over two years later by the accidental collision between Cosmos 2251 and the operational Iridium 33.

These two events represent the worst satellite breakups in history; a total of 5,579 fragments from the events were catalogued by the US Space Surveillance Network (SSN), and almost 5,000 still remained in orbit as of January 2013.

Consequently, the 2013 space debris covers lower-Earth orbit satellites, since this region is where the significant debris-related incidents have been experienced to date.

The authors of the article – Robin Gubby, David Wade and David Hoffer – note that a number of future industry developments could affect RDSs. These include the introduction of new technology into satellite design; an increase in the number of all-electric-propulsion satellites; and a significant addition to the population of lower-Earth orbit satellites, which could increase the risk of collision, debris, etc.

For the moment, however, the four existing classes of RDS appear to have the space insurance market well and truly covered.

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