The satellite industry has a huge problem - INSURANCE

[thewayne]

It's an interesting problem. Insurance is a pool of shared risk. We all pay to insure our cars, but only a small number of us will have a loss through an accident or theft and need to make a claim, so insurance companies can be overall profitable.

The satellite insurance industry is a bit different. Take, for example, StarLink. Musk launches 30+ satellites in a single throw, expecting some will fail or won't reach orbit or whatever. He doesn't care. They aren't insured, and more will be going up soon enough to make up the coverage of the ones that didn't make it. And lots of people are having him launch lots of small satellites with the same philosophy. And there is the problem: they're not buying insurance, so while the number of satellites being launched is increasing, the pool is kinda static and not growing.

Enter ViaSat.

The launched an insured billion dollar satellite. Actually, they have a few in orbit. And there was a power supply failure on an absolutely critical subsystem. We're talking a subsystem that if it doesn't work, you've got a gigantic paperweight in orbit that can't do what it was launched for. Why said system was not multi-redundant, I do not know. They have another satellite in orbit that developed an antenna problem and is not working nearly up to spec. Also insured. These satellites could represent legitimate claims of over Seven Hundred Million U.S. Dollars.

From the article: "In 2019, the total losses from satellite claims amounted to $788 million, which overwhelmed the total premiums for the year at $500 million." The next year, three big insurers stopped offering satellite insurance.

What happens when insurance carriers stop offering insurance? Well, you can't buy it if they're not selling it. Do you build and launch a billion dollar satellite if you can't get insurance for it? California has a problem right now with car insurance: extremely hard for people entering the market to get it, or to get above bare minimum coverage at high prices as companies have been leaving the California market. So if your car gets totaled and you and the other guy both have bare minimums, you could be on the hook for a lot of money to get your car replaced if you still have a note against it!

Is space the next frontier? This could put a major crimp in the satellite industry.

https://finance.yahoo.com/news/billion-dollar-satellite-risks-upending-093002573.html

https://science.slashdot.org/story/23/09/04/0149214/how-a-billion-dollar-satellite-risks-upending-the-space-insurance-industry

Comments

[armiphlage]

Back in the old days, one of our customers would build five complete satellites for every one they'd launch. The cost to buy the extra parts was minimal - for custom parts, the expensive bit is setup, while for commercial off-the-shelf parts, it's almost as cheap to buy the minimum order quantity than to get a distributor to give you exact quantities. The cost of building four extra units was less than the cost of insuring one.

If something happened, you'd have plenty of spares. Any leftovers would decorate boardrooms or office lobbies.

[thewayne]

True.  Once you have the design finalized, and the manufacturing process laid in, the actual build cost is kind of incidental.  That was a smart way to do it.

[dewline]

Well, we still need infrastructure to be in place for whatever we end up doing off-planet. In Earth orbit, on Luna, on Mars, elsewhere in Sol system...we're still going to need it. So we're going to need some sort of insurance arrangements, right? Whether the private sector's willing to take that risk or not. And the private insurance industry is a user of space-related services themselves.

[silveradept]

Insurance is also supposed to make it easier and less cumbersome to get appropriate amounts of money for things that are the fault of the person or company doing the injurious thing. The companies can then fight each other in court over the matter, but the person who needs the money because of the problem gets paid so they can continue with their life, instead of having to wait and see whether they successfully sue someone else for enough damages to cover both costs and injuries.

It feels like we're getting to the point where space debris that re-enters atmosphere and doesn't burn up could be a risk, in addition to space junk running into and damaging another satellite and possibly taking it out as well. So, perhaps those companies that want to spend their money doing space things could be compelled to carry much higher amounts of insurance, or proof that they have set aside escrow enough to cover insurance claims against them.

[disneydream06]

Musk strikes again. UGH!!!!!!!!!!!!!!!!
Hugs, Jon

[thewayne]

No, I don't think Musk is the problem here.  I think the issue is that the satellite insurance industry hasn't adjusted to keep pace with the current rate and valuation of launches, and they've been taking it in the shorts because of the changes therein.  Musk isn't insuring his satellites and making claims, nor are the people launching with him.  Now, they are perhaps causing the insurance pool to lose money, but at the same time, they're not making claims against the pool.  There's a Monty Python insurance sketch where a vicar goes to make a claim, and the agent he bought it from says "Sorry, vic.  You bought our 'no claim' policy, which is a great policy, unless, of course, you need to make a claim."  Insurance by its very nature is a bit of a scam unless you need to make a claim, and if the insurance companies don't balance things properly, it's easy for them to get into trouble.