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Insuring Commercial NewSpace
Activities
Yaw Nyampong
3rd Manfred Lachs Conference on NewSpace Commercialization
17 March 2015
Introduction
Risks attendant to NewSpace activities
Launch risks
In-orbit risks
Commercial risks
End of life disposal etc
Risk management options for NewSpace activities
Risk retention
Risk transfer – usually via insurance
Risk Transfer through Insurance
Category
Criterion
Characteristic
1
Risk/uncertainty
Measurable
2
Loss occurrences
Independent
3
Maximum loss
Manageable
Average loss
Moderate
5
Loss frequency
High
6
Moral Hazard, Adverse selection
Not excessive
7
Insurance premium
Adequate, affordable
Insurance cover limits
Acceptable
9
Industry capacity
Sufficient
10
Public policy
Consistent with cover
Legal system
Permits the cover
4
8
11
Actuarial
Market
Determined
Societal
The Challenge of Insuring NewSpace
Activities
Risk pool of NewSpace activities is not large enough – The Law of Large Numbers
may not be a useful rating tool
Low frequency-high impact risks (Insurance works better with high frequencylow impact events)
Very little historical data available for purposes of rating the risks
Industry capacity is limited (estimated at $490 million for launch risks and $620
million for in orbit risks a few years ago)
Premiums for NewSpace activities are likely to be very high
Coverage is also likely to be very limited in the initial stages
The Challenges of Insuring NewSpace
Activities
Proposed NewSpace activities such as commercial suborbital flights and
space tourism are not covered by any existing insurance regime (OECD,
2014).
The few paying space tourists to the International Space Station have so far
taken out personal accident insurance coverage (OECD, 2014).
Should the absence/unavailability of insurance constitute a hindrance to the
development and commercialization of NewSpace activities?
The Way Forward
Role of law: In many countries the law requires space actors to procure
insurance coverage on the basis of the maximum probable loss (MPL) that
may be sustained as a result of their activities. This will have to be
reconsidered if the desire is to encourage the development of NewSpace
activities.
Potential alternatives and/or complements to insurance may include:
Capping the liability of operators at an insurable level and making it mandatory for
operators to procure insurance up to those limits
Exploring the possibility of transferring NewSpace risks to the capital markets
through Alternative Risk Transfer mechanisms
Thank you for your attention!