Tag Archives: satellite risk

Satellite Insurance

Satellite insurance is a specialised branch of aviation insurance. Twenty insurers worldwide participate directly. It covers:
– relaunching the satellite if the launch operation fails;
– replacing the satellite if it is destroyed, positioned in an improper orbit;
– fails in orbit;
– liability for damage to third parties caused by the satellite or the launch vehicle.

In 1965 the first satellite insurance was placed with Lloyds of London to cover physical damages on pre-launch for the “Early Bird” satellite Intelsat 1. In 1968 coverage was arranged for pre-launch and launch perils for the Intelstat 111.

Insurance available for satellites is divided into two sections: – satellite coverage and ground risk coverage.

Satellite Risk

Satellite risk coverage is insurance against damage to the satellite itself. There are four basic types of coverage.

  1. Prelaunch insurance provides coverage for loss or damage to satellite or its components from the time they leave the manufacturer’s premises, during the transit to the launch site, through testing, fueling and integration with the launch up until the time the launch’s rocket engines are ignited for the purpose of the actual launch.
  2. Launch insurance provides coverage for the period from the intentional ignition of the engines until the satellite separate from the final stage of the launch vehicle, or it may continue until completion of the testing phase in orbit. Typical coverage usually runs for a period of twelve months but is limited to 45-60 days in respect of testing phase in orbit. Launch failure is the greatest probability of satellite loss and approximately 7% of satellites have failed on launch.
  3. Coverage while in orbit provides for physical loss, damage, or even failure for the insured satellite while in orbit or during orbit placement. Elements of risk attached to satellites during orbit are damage caused by objects in the hostile space environment, extremes of temperature, and radiation. Because it is not typically possible to repair a satellite once it is physically placed in orbit, the coverage is basically granted as a product guarantee.
  4. Third party liability is the final section of the policy, and is a statutory requirement of the Government of the nation where the launch will take place, regardless of the nationality of the satellite owner. A special license must be provided to the regulating authorities before a launch can take place. Coverage usually runs up to 90 days following the actual launch. Loss of revenue coverage is also available but is not purchased often.

Ground Risk: As many ground stations are run by large government entities such as NASA, failure on the part of the insured is rare. In cases where failure occurs due to events which are beyond the control of the insured (such as an earthquake) coverage provides for the cost of hiring premises, replacing computer systems, software backup, and other items necessary to resume operations.

Underwriting considerations: When considering a rating structure for satellite insurance coverage, during the early day many insurers based their rating according to the launch vehicle. For example, if the launch vehicle being used had a one in ten failure rate, the insurance premium would be ten per cent of the gross cost. Today insurers use statistics and computer modeling to arrive at premium rates, although data for calculations is limited. Another aspect of satellite insurance is the procedure attached to salvage. Though it is impossible to obtain monetary value from the wreckage in the event of an actual total loss or constructive total loss, many insurers rely on sharing any revenue which may be obtainable from the failed satellite with the insured.

Regulation: Rules of satellite launch technology is governed by International Traffic in Arms Regulation (ITAR) in the United States. The regulation states that details of any technology provided to insurance underwriters are subject to strict rules and are provided to selected insurers only. This is an important consideration as the structure and technology used on launch vehicles is similar to missile technology for weapons. Failure to comply with ITAR rules could result in heavy fines and imprisonment. In cases where reinsurance is arranged, re-insurers who provide such coverage have to rely on very limited information.

Causes of Satellite Failure:

Launch: The most significant hazard affecting satellites is the launch itself. A failed launch may be due to explosion of the launch vehicle or the failure to deploy the satellite into a usable orbit. Launch failure has historically represented the greatest probability of loss and about seven per cent of satellites have failed on launch.

Post Separation and In Orbit Losses: While launch represents the greatest probability of failure satellite failures can occur at any time during orbital life. Such failures may result in an total loss of functionality or may be partial, where the satellite continues to operate but at a diminished capacity or reduced expected life.

Immediately following the successful deployment of a satellite into a usable orbit there is roughly 5% probability that the satellite will experience a total or partial failure in the first six – 12 months of its life. This period is referred to as the Post Separation Phase (PSP). While orbital losses most frequently occur during the post separation phase they can occur in the later years of operation as well.

If the satellite survives PSP it enters the in-orbit or INO phase and the probability of failure is much diminished in any one year. Indeed, once in orbit, many satellite operate for periods that are years in excess of their expected useful life. Still, unexpected total or partial failure may occur at any time.

The causes of orbit failure , PSP or INO, are varied. Obviously, systems will fail from time to time and, if their function cannot be replaced by built-in redundancies, there will be a loss. However, other dangers exist in the wilds of space.

These include:

  • Electrostatic discharges: The most prevalent post-separation in orbit hazard to a satellite is electrostatic charge, which can be induced by solar activity or by the formation of plasma clouds due to the ionization of materials colliding with a satellite.
  • Loss of Fuel: Satellites carry a certain amount of fuel with them. Such fuel is needed to keep the satellite orbiting in the required path. However, the fuel supply may be consumed at a faster rate than anticipated, if for example, an initial amount was spent in putting the satellite into its useful orbit. Such a situation may be deemed a partial failure as the useful life of the satellite is now expected to be reduced.
  • Solar Storms: Solar storms can interfere with the proper functioning of a satellite’s electrical components and affect satellites over a large percentage of the sky. The magnetic activity associated with solar storms can induce electrostatic discharges that can cause satellites to malfunction. Solar storms can also warm air to rise, dragging low earth orbit satellites into lower orbits and forcing the operations to use onboard fuel to reposition the satellite, potentially shortening its life. Numerous recorded anomalies are thought to be attributable to solar storms. Only one insured loss is believed to be attributable to anomalies induced by solar storms (Telstar 401)