SES Approves Satellite Shipment for Falcon 9 Launch Despite Questions

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Updated 4:56 p.m. EDT

PARIS — Satellite fleet operator SES has authorized the shipment of its SES-8 satellite to Florida to prepare for launch aboard a Space Exploration Technologies Corp. (SpaceX) Falcon 9 rocket despite concerns among insurance industry officials that the Sept. 29 demonstration flight of a new Falcon 9 variant did not meet a key objective.

Luxembourg-based SES has said it is awaiting more data from SpaceX about why the Falcon 9 v1.1’s upper-stage engine did not complete a second ignition at the end of the vehicle’s inaugural mission as planned. A reignition of the upper stage will be required to place SES-8 into geostationary transfer orbit, the dropoff point for most telecommunications satellites.

But in a demonstration of how much it wants Hawthorne, Calif.-based SpaceX to establish itself in the commercial launch market, SES on Oct. 2 authorized satellite builder Orbital Sciences to pack SES-8 into a container and bring it to Cape Canaveral Air Force Station, Fla., by truck.

The upper-stage reignition was attempted after the Falcon 9 v1.1 — an upgrade featuring new engines, a stretched fuel tank and a 5-meter fairing — successfully deployed the Canadian Space Agency’s Cassiope space weather monitoring satellite and three secondary payloads into low Earth orbit in a mission that launched from Vandenberg Air Force Base, Calif. By press time Oct. 4, the payload owners said their satellites were operating with no major issues.

But the U.S. Defense Department was still tracking nearly double the number of objects associated with the launch than had been expected, puzzling experts and casual observers alike and leading SpaceX to issue a statement saying the upper stage did not explode or break apart in orbit.

“Regarding the rumors you may have heard about the Falcon 9 second stage, in short, our data confirms there was no rupture of any kind on the second stage,” SpaceX spokeswoman Emily Shanklin said via email Oct. 1. “Following separation of the satellites to their correct orbit, the Falcon 9 second stage underwent a controlled venting of propellants … and the stage was successfully safed. During this process, it is possible insulation came off the fuel dome on the second stage and is the source of what some observers incorrectly interpreted as a rupture in the second stage.”

Assessing the upper-stage issue 

During a postlaunch press briefing Sept. 29, meanwhile, SpaceX Chief Executive Elon Musk said the company had plenty of telemetry data to analyze why the rocket’s on-board computer halted the upper-stage reignition sequence. Analyzing it could take a few weeks, he said, but he insisted the issue was relatively minor given the Merlin 1D engine’s multiple restarts during ground testing.

SES has insured the SES-8 launch for $200 million and paid a premium of about $24 million, or 12 percent, to cover the launch and the satellite’s first year in orbit, industry officials said. A 12 percent premium rate is considered low for a rocket without a commercial track record and follows a recent downward trend in insurance costs in the industry. Subtracting the premium, the space insurance underwriters who signed the policy are risking $176 million.

One insurance official said the underwriters have sent SES a detailed list of questions about the Sept. 29 flight, whose stated goal for them and for SES was to demonstrate the Falcon 9 v1.1’s ability to carry satellites into geostationary transfer orbit.

“Given the upper stage issue this requirement clearly was not met,” said the insurance official. “There was supposed to be a full engine restart, and there was not — period. If SES wants to proceed with a launch despite this, we will have to determine whether that constitutes a material change to the policy. The fact is that most policies of this type include language obliging the insured party to ‘act as if uninsured.’ Would SES go forward with a launch if it were not insured? This is the question.”

Another insurance industry official said that while insurance policies are not written with an eye to providing underwriters an escape hatch, insurers do retain the ability “to act” if they conclude that unforeseen risks have materialized since the policy was written.

One insurance industry official said the industry is likely to be paying some $500 million in satellite-related claims in 2013. Assuming that Europe’s Ariane 5 and Russia’s Proton rocket both complete additional commercial launches before the end of the year, underwriters are likely to collect premiums totaling around $700 million.

The biggest claim so far in 2013 was the $407 million loss of the Intelsat IS-27 satellite following a failure of its Sea Launch rocket soon after liftoff. The satellite was carrying a UHF-band payload, intended for military customers, making it more expensive than comparable all-commercial telecommunications satellites.

Another claim expected to be paid before the end of the year, totaling around $70 million, is for a damaged solar array on the Koreasat 5 telecommunications satellite, which was launched in 2006 and is owned by KT Corp. of South Korea.

SES is the world’s second-largest commercial satellite fleet operator and in recent years has been perhaps the biggest single customer for satellite insurance.

But SES is not only a customer for insurers and for SpaceX. The company’s technical team has made clear in the past couple of years that SES is unsatisfied with the current state of the commercial launch market and wants a broader supply. With Chinese rockets out of bounds to SES given the company’s decision not to alienate the U.S. government, SpaceX has become SES’s single biggest hope for changing the commercial launch landscape.

SES has stuck with SpaceX despite the launch’s multiple delays in part because it secured a price of well under $60 million in return for being the first established fleet operator to publicly announce a Falcon 9 contract. But it was also at least partly because canceling the launch might delay SpaceX’s establishment as a commercial launch alternative.

An insurance official said that if SES and its underwriters draw different conclusions from the telemetry data they receive from SpaceX, SES could offer sweeteners such as a guarantee of future insurance business, or an offer of a higher premium, or to self-insure part of the launch risk and reduce underwriters’ exposure.