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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!