In a development that its backers say could overhaul the space-insurance industry, a Lloyd’s of London insurance syndicate has agreed to finance, on its own, an in-orbit policy that covers Inmarsat’s two new Inmarsat-4 satellites using a new risk-assessment tool developed by Qinetiq of Britain.
Liberty Syndicates, which up to now has been a minor player among the world’s space-insurance underwriters, is making up to $225 million available this year for each space insurance policy it backs, without seeking financial support from other underwriters.
Liberty is taking on this exceptionally high level of risk because it believes that Qinetiq and Sciemus Ltd. of London have developed an analytical tool that enables it to forecast satellite or rocket failures. The system, called Space Risk Assessment Tool, or SpaceRAT, forecasts likely satellite or launch-vehicle anomalies based on the hardware’s past performance and the satellite operator’s track record of satellite reliability.
The SpaceRAT system is designed to offer substantially lower premiums to those satellite operators whose track record and selection of hardware are considered to give them a lower likelihood of failure.
“It is a unique system based on sophisticated engineering knowledge,” Liberty Chief Executive Officer Sean Dalton said in a March 16 interview. “Nobody can ever know completely about a manufacturer’s testing, b ut this system raises the likelihood that we could spot risks before insuring them.”
Liberty Syndicates, a subsidiary of Liberty Mutual Group, raised eyebrows in January when it announced its affiliation with Sciemus and the Qinetiq-designed risk-assessment system.
Dalton said that up to now, no other space insurance underwriters have offered to join Liberty in backing SpaceRAT.
That may change with the Inmarsat policy. Liberty and Sciemus have agreed to insure the two large Inmarsat-4 satellites, each valued at more than $200 million, for a year.
Inmarsat spokesman Chris McLaughlin said the company would not provide details of the coverage beyond saying the mobile satellite services operator “is very happy with the arrangement.”
Sciemus Chief Executive Andre Finn said the policy written for Inmarsat will save the company about 30 percent over what it would have had to spend to purchase conventional coverage.
Full insurance for a satellite in orbit typically runs around 2.5 percent per year, which means a healthy satellite worth about $200 million a year would have an annual premium of about $5 million.
Most insurance policies are arranged for an operator by a broker who, with the help of underwriters, assembles a package that can include a dozen or more individual insurers, each taking a different share of the whole.
Spreading the risk among a large pool of underwriters permits each insurer to take part in the coverage without making the kind of all-or-nothing commitment that could ruin an insurer’s year in the event of a failure.
The way the insurance business has worked up to now, even those satellite-fleet operators with the best records of satellite reliability have not been able to secure sharply reduced insurance premiums.
Underwriters have said the space business is too small to permit a differentiation, and that in any event today’s best risk may be tomorrow’s failure.
Liberty and Sciemus have turned this practice upside down.
We are not willing to work with every satellite operator, that’s clear,” Finn said. “We have identified a group of potential companies that have a good track record, and we think we can save them a substantial amount on insurance.”
Finn and Dalton insisted they are willing to work with space insurance brokers. But for the Inmarsat deal, a broker was not involved, and Finn and Dalton agreed that if their approach to the business catches on, brokers may have to rethink how they deal with their customers.
Insurance brokers and underwriters who have commented on the Liberty/Sciemus venture in recent weeks have expressed curiosity more than antagonism, Dalton said. He said that might change now that Inmarsat has signed on as the venture’s first client. Inmarsat, which has been operating satellites for more than 20 years, has filed few claims over the years as a percentage of the premiums it has paid for coverage despite the fact that, as a mobile satellite services operator, its satellites are not standard bent-pipe-type telecommunications spacecraft.