The recent good performance of insured satellites and launch vehicles has helped generate substantial profit for underwriters, causing new insurance capacity to enter the market and lowering premiums, insurance underwriters and brokers agreed.
One of the most visible signs of the confidence insurers have in the industry is the fact that underwriters are willing to insure single launches for ever-higher amounts of coverage.
Ten years ago, it was difficult to assemble enough underwriting capacity to insure a single launch for much more than $400 million in combined coverage. Then as now, the most expensive launches are likely to be European Ariane 5 rockets carrying two telecommunications satellites.
But as insurers moved past the big satellite claims that punished the industry in the late 1990s, and as the Ariane 5 rocket logged repeated successes, underwriters became more comfortable with placing ever-larger amounts of coverage on a single launch.
In 2009, the launch of Germany’s ComsatBw-1 military telecommunications satellite with Hispasat’s Amazonas-2 commercial telecommunications satellite featured a combined package of about $675 million.
Later this month, an Ariane 5 will carry the identical ComsatBw-2 satellite and the Astra 3B satellite for SES of Luxembourg, with a record $700 million in insurance coverage, according to underwriters.
Chris Kunstadter, senior vice president at underwriter XL Insurance of the United States, said part of the reason for the lower rates and higher per-launch insurance limits is the fact that the industry has been in a period dominated by well-proven rocket and satellite hardware.
But Kunstadter and other underwriters cautioned that rates cannot continue to drop without endangering the long-term supply of insurance coverage. “As the saying goes, ‘When things are going well, your luck is bound to change,’” said Kunstadter, who said he already sees signs that some insurance policies are including less-rigorous clauses.
Rick Fillers, vice president and head of space underwriting at Paris Re, said he sees the industry heading for a repeat of past cycles in which space-insurance profits attract underwriters who are less technically astute, leading to losses and the eventual exit of these same underwriters and a decline in total available capacity.
Fillers said satellite insurance rates have fallen close to the point where Paris Re will no longer take part out of concern that the industry’s long-term viability is being put at risk.
The market counts about 175 satellites insured in orbit for a total value of some $17 billion, according to XL estimates.
