#SpaceWatchGL Insights: Global Insurance Market Review – SpaceWatch.Global

and Nicholas Borroz

It is not yet known whether the insurance market will deal with constellations of LEO sats.
Credits: Official SpaceX Photos, CC0, via Wikimedia Commons

The term “airline insurance” generally refers to first-party insurance that covers pre-launch, launch, initial runway performance, and long-term life in the runway. There are two main reasons real estate companies purchase insurance. The first is “return” purposes – it helps them to return the money that caused the accident, pay back the donors, and leave the whole business. The second is the purpose of “broadcasting” – it returns the money associated with a particular project and allows the company to try again. Buying insurance involves understanding the premiums and potential risks. Based on this, insurers pay a “premium” to provide coverage – essentially a percentage of the total amount they will pay customers in the event of an accident.

Insurers want to know the details of the insurance system, including any changes made to the system in preparation for the installation (as it happens); they do not tolerate “overinsuring”, which encourages accidents, or “underinsuring”, which allows companies to pay less than they otherwise would have. Payment disputes may arise if plan information was incorrectly represented to insurers.

It’s also worth noting that there are other costs to buying insurance besides premiums. One notable example relates to the large-scale exchange of technical information that insurers often require: aerospace companies must adhere to policies to ensure that the exchange of information does not violate property regulations.

“Pre-departure” insurance covers shipping and handling, and insurers in some industries often provide this. However, over time, insurance is provided by insurers that specialize in aviation. The majority of how the space insurance Learning is a package deal, designed Launch Learning including Learning for the first year in the corridor; This is because the highest rate of failure of satellites in orbit occurs during their first year in orbit.

Third party insurance

“Space insurance” often refers to third-party insurance, the primary enforcement of which is the responsibility of governments for items released into space. In addition to protecting themselves from accidents, aerospace companies also purchase insurance to cover damages they may cause to others – for example, a person who is affected by falling debris. Under international law, governments are responsible for destroying air pollution that occurs under their jurisdiction. Governments often require companies to purchase third-party insurance, as this reduces the government’s costs. Insurance requirements are usually for a certain amount, after which governments are responsible for paying for damages.

The majority of how the space insurance Learning is a package deal, designed Launch Learning including Learning for the first year in the corridor; This is because the highest rate of failure of satellites in orbit occurs during their first year in orbit.

Governments reduce insurance requirements to a certain extent so that insurance becomes less expensive for companies and hinders the growth of companies. Governments try to negotiate agreements between companies that want to pay certain costs, but many companies find that operating in space is too expensive.

Accidental relationship with the broker

Risk managers in the aerospace industry often buy insurance through brokers, which creates risk opportunities for insurers and their underwriters. Risk Managers help space companies to assess how they can spend money to manage risks. They are often responsible for purchasing insurance (in smaller companies, this task may fall to other employees). Risk managers often buy insurance indirectly through brokers, who in turn compete to sell broker services to risk managers. Brokers maintain relationships with insurers (companies that provide insurance). Risk managers notify brokers of potential insurance buyers, and brokers bring those opportunities to insurers. Underwriters are responsible for calculating the risk and determining the premiums paid by insurers; Underwriters may work within insurance companies or have contracts.

It is important to note that, although the space companies are the ones who buy insurance, the variables are often one of the sellers of “risk” for insurers – brokers try to give insurers enough understanding and confidence in the system to be comfortable insuring it. . Brokers usually start buying insurance about two years before they open.

A volatile and limited market

Aviation insurance is a volatile market – there are few insurers, and one major accident can cause a global power outage and have a significant impact on prices. There are fewer real estate insurers than many other industries – about 30 to 40 “markets” exist worldwide. The total value of the dedicated property insurance is estimated to be between $500 million and $1 billion. Given that GEO sats cost hundreds of millions of dollars, it is easy to understand why the demand fluctuates wildly; when a large loss occurs, the market quickly “dry up”, meaning that there is less insurance and premiums rise significantly.

Although insurance companies are the primary buyers of insurance, reinsurance is often one of the “risk selling” businesses for insurers.

Another aspect of the small market size is that individual insurers do not provide full coverage; almost always, insurance groups provide support. Brokers contact many insurers, trying to match quotes and premiums. Even if a single insurer can provide full coverage, it is unlikely to do so because it will require differentiating the risk on a case-by-case basis; it will spread its exposure so that it is confident that the amount collected will cover the amount of payments it will need to make.

One reason there are so few dedicated insurers is that the barriers to entry are high. Large insurers are able to diversify their risk exposures so that they are not over-exposed and suffer from a large business risk.

Interestingly, “market” is a vague term often used by professionals in the insurance industry. Sometimes it refers to a single company. Sometimes, it refers to a group of companies. Sometimes, it refers to a national insurance group. And sometimes it means insurance groups that are somehow connected.

Insurance and Re-Insurance: what’s the difference?

In aviation insurance, there is little skill in insurance and renewal insurance, due to the small size of the market. Insurers are organizations that provide aviation insurance, while insurers are organizations that provide insurance. In large insurance markets that operate in certain industries, insurance companies often have either an insurer or an insurer. But this is not the case in space, mainly because there are few insurance providers. In fact, companies constantly switch between the roles of insurer and reinsurer.

Governments sometimes impose national insurance requirements; aerospace companies must purchase specific insurance from local providers. This requirement may exist even if local insurers do not have sufficient capacity to provide insurance. In such cases, local insurers act as primary insurers, but they also reinforce themselves with insurers in other markets.

GEO vs. LEO is an insurance market

Space insurance is usually for GEO sats; insurers are reluctant to insure small LEOs. Exposure to space insurance depends on the size of the GEO industry. GEO sats have become the “bread and butter” of insurance because they are so large and expensive that operators are forced to insure them. But today most of the satellites being launched are going to LEO, and insurers don’t like to insure them for three reasons: 1) small LEO sats have a low legacy, which makes their accident history difficult to test; 2) LEO operators pay less than what GEO used to because of the low cost of LEO; and 3) LEO space is often confined to constellations, making it difficult to test for mission failure.

LEO satellite owners and operators, for their part, have no interest in insuring satellites. Star companies tend to “introduce” some level of failure into their processes. It is unusual for them to launch satellites, for example. Insurers have yet to make insurance the most sought after among LEOs.

One reason there are so few dedicated insurers is that the barriers to entry are high.

Traditionally, fixed income insurance is based on property rather than cash. Since constellations include residuals, there is no incentive to support satellites (although asset-based insurance may be available if insurers and operators identify critical constellations that require coverage). And many of the constellations are still in the process of developing funding strategies, so it’s not clear what income-based insurance policies should look like. Star companies often buy insurance to get started, however. This is because the number of satellites in space is made into a business plan, but not the loss of several satellites simultaneously being launched on the same vehicle.

The biggest change on the horizon for LEO insurance is related to space debris – governments can deal with space debris with a new insurance policy. Space debris is a serious problem, so much so that even people outside the space industry know it. Many governments are now considering imposing waste-related insurance on industry. The biggest challenge will be determining the right amount of insurance needed; it will need to be sufficient to prevent governments from paying too much, but not so much that it raises the cost of space operations and slows the growth of the space industry.

This article was previously published on Younger, an Auckland-based consultancy that supports the aerospace industry with market research, technical advice, and business development services. Read and download the original article Here.

Nicholas Borroz. Photo courtesy of the author

Nicholas Borroz is the founder of Rotoiti, an Auckland-based consultancy supporting aerospace companies with market research, consultancy, and business development services. He previously worked in business intelligence in Washington, DC, where he coordinated a global subcontractor network to support clients across multiple industries in risk management, due diligence, and compliance. Nicholas received his PhD in international business from the University of Auckland, his MA in international economics from Johns Hopkins SAIS, and his BA in international relations from Macalester College.