Insurance Question Clouds Future of Space Tourism Industry

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  Space News Business

Insurance Question Clouds Future of Space Tourism Industry

By PETER B. de SELDING
Space News Staff Writer
posted: 02 April 2007
04:27 pm ET


MILAN — The creation of a viable, affordable insurance regime for future space tourists remains an unresolved issue that ultimately could scuttle the space-tourism industry before it has a chance to prove itself, according to industry experts trying to tackle the problem.

Despite the efforts of the U.S. government to craft a legal framework that protects the nascent industry from many liability-related issues, space-tourism companies have yet to persuade insurers that the risks are worth the investment, these officials said. They also questioned whether the government’s regulations will withstand legal challenge.

Brian Binnie, a test pilot at Scaled Composites LLC of Mojave, Calif. — he flew one of the two 2004 flights that won the $10 million Ansari X Prize — said insurance premiums for the company’s SpaceShipOne vehicle have been exorbitant.

In a March 23 address to the 14th International Space Insurance Conference here, Binnie said the technical achievements of SpaceShipOne and the promise of its tourist-carrying successor, the SpaceShipTwo, now in development, have occurred despite continued doubts about whether affordable insurance will be available.

Jonathan Firth, project director at Virgin Galactic, a company formed in Richard Branson’s Virgin Group to sell tourist flights on SpaceShipTwo starting in 2009, said the limited amount of revenue generated per flight is one reason for insurers’ hesitation.

“We are starting now to look for insurance coverage,” Firth said. “If we are successful, we could have 500 passengers in the first year and 50,000 passengers over 10 years. These are volumes that could provide a worthwhile return to insurers, even with relatively low premiums.”

The U.S. Federal Aviation Administration (FAA), in February, adopted final rules governing the space tourism industry in the United States, and for U.S. companies operating anywhere.

Stephen Tucker, a senior partner in the law firm Mendes & Mount, said the U.S. policy was written to provide maximum liberty to space tour operators by limiting the possibility of litigation in the event of an accident.

“[T]he scheme is essentially one that is best termed ‘fly at your own risk,'” Tucker said. “Passengers, called space flight participants, will be legally required to waive liability claims. Emphasis is placed on informed consent of crew and passengers.”

Under these rules, the tour operators will be responsible for providing up to $10 million in coverage for damages to uninvolved third parties . Damages above that amount will be paid by the U.S. government — a scheme similar to what governs today’s commercial satellite-launching industry.

But the FAA’s protections may not be enough to attract insurers to the business. Tucker said he is doubtful that “any of this will be effective” in preventing lawsuits from the families of multi-millionaire passengers who die in a space-tourism crash.

Sean Gates, legal advisor to the International Union of Aviation Insurers, said even high premiums will not be enough to cover the loss of a very rich passenger. Gates said space-tour operators should set a per-seat limit on insurance coverage.

“The FAA is trying to get survivors to waive their rights,” Tucker said. “I am not sure how effective that will be in the case of a Bill Gates [Microsoft’s chairman] who gets killed in a flight. I think you can expect lawsuits.”

Firth agreed that crafting passenger contracts to limit future claims will not be easy.

“The FAA has been supportive, but informed consent is going to be quite a big issue,” Firth said of Virgin Galactic’s future business. “Some [passengers or their families] might say they didn’t know what they were getting into.”

Firth said Virgin Galactic learned first-hand of the complexities involved when several employees signed liability waivers to ride on a centrifuge operated by Qinetiq in Farnborough, England. “Even the informed consent to go on the centrifuge was quite involved,” Firth said.

Binnie said that despite the high insurance premiums faced so far by space tourism operators — he said one company paid more in insurance premiums than it spent on developing its vehicle — space tourism is probably unstoppable.

“It’s an experience that will sell itself,” Binnie said of the four minutes of weightlessness that will be offered each passenger in SpaceShipTwo. “I have no doubt about it: It’s coming to your area sooner than you think.”