2009 Shaping up as Profitable Year for Insurers

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PARIS — Insurers are likely to face a claim of slightly more than $100 million to pay for the reduced service life of Indonesia’s Palapa-D telecommunications satellite, bringing to around $500 million the amount of satellite-related insurance claims made so far in 2009, insurance broker Willis Inspace said Sept. 4.

That $500 million in losses will be set against around $800 million in premium revenue if the three Ariane 5 vehicles and three or four International Launch Services (ILS) Proton rockets scheduled to be launched between September and December occur without failure, according to Willis.

Four major claims make up the estimated losses so far in 2009: the sudden in-orbit loss of Eutelsat’s W2M satellite, insured for 120.5 million euros ($172 million); the failure of two or more of the six satellites launched in mid-2008 by satellite-messaging service provider Orbcomm, which has filed a $50 million claim; a claim of 130 million euros by the Eutelsat-SES joint venture for a defect in the S-band antenna aboard Eutelsat’s W2A satellite; and the Palapa-D claim for about half the satellite’s insured value of some $203 million.

The Palapa-D claim will depend on the estimated remaining life of the satellite once it arrives at its operating slot in geostationary orbit in mid-September.

The next Ariane 5 rocket, set for launch in late September, will be carrying two satellites insured for a combined total of $570 million, making it by far the biggest space-insurance event of the year. The European rocket will be carrying Hispasat’s Amazonas-2 commercial telecommunications satellite and COMSATBw-1, Germany’s first dedicated military telecommunications satellite.

If all of the end-of-year launches go without a hitch, it will be the fifth consecutive year of substantial gross profit for space insurers. The recent profitability has led some underwriters to increase the amount of money they will make available for space insurance in 2010 compared to 2009.

Willis Inspace Chief Executive Roger Bathurst said in a Sept. 4 interview that insurance rates for satellites launched by Ariane 5 and ILS Proton rockets have been trending down in recent months.

For a relatively uncomplicated satellite to be launched aboard an Ariane 5, insurance premiums now average 11.5 percent to 12 percent of the insured value for the launch and the first year in orbit.

For an ILS Proton launch, the owner of the same satellite would pay a premium of between 12.5 percent and 14 percent — a rate expected to drop as the Proton vehicle notches further successes, Bathurst said.

After the expiration of their initial launch-plus-one-year policies, commercial satellite operators generally take out new one-year policies covering the satellite’s in-orbit operation. These in-orbit rates for a satellite whose design has no history of in-orbit anomalies have also been declining; they now average 1.3 percent to 1.35 percent of the insured value for satellites viewed as the least risky.

For satellites with lots of new technology, or which carry hardware that has failed on other spacecraft, the annual in-orbit rate will be around 1.9 percent per year.

Bathurst said the last failure of a satellite that had reported no trouble during its first year of operations was the Telstar 402 R satellite, which failed suddenly in orbit in 2003.

“The industry has had a really good run for in-orbit satellite performance,” Bathurst said in explaining the drop in premiums for in-orbit coverage.