The space insurance market, after several years of historically high insurance premiums, appears to be headed toward lower rates for proven satellite and launch hardware — on the condition that the sum insured remains modest, according to Philippe Montpert, the president of Aon Explorer, the Paris-based arm of Aon Corp. of Chicago.

Montpert said Aon is completing a two-launch package on behalf of the Arabsat organization of Riyadh, Saudi Arabia — two EADS Astrium-built satellites to be launched aboard International Launch Services Proton-M rockets — and has been able to secure premiums for several points lower than prevailing rates several months ago.

Montpert declined to detail the coverage, but said the key to winning lower premiums was Arabsat’s willingness to retain part of the launch and in-orbit risk on its own. This permitted Aon and Arabsat to limit the requested coverage to less than $200 million per launch.

“The key was to keep the total low enough so that competitive forces among insurers were allowed to work to the full extent,” Montpert said Sept. 2. “The EADS Astrium Eurostar platform and the Proton-M launch vehicle are well-proven, and the satellites do not carry any especially challenging elements. But we could not have secured the premium we did if we had sought coverage for, say, $300 million per launch.”

The Arabsat 4A and 4B satellites are scheduled for launch in late 2005 and mid-2006.

Aon and the other major space-insurance brokers — Marsh Space Projects, Willis and International Insurance Brokers — have long sought to end a common insurance underwriting practice that has made it difficult for owners of large satellites to secure low-priced coverage.

The practice in question permits all insurers backing a given launch to profit from the highest premium rate that any one of them — generally those that are the last to sign up — secures from the satellite owner.

The total amount of coverage available globally for launch insurance is around $600 million. But the actual amount that can realistically be rounded up to cover a single launch is around $400 million.

Brokers signing up underwriters to be part of a launch-insurance package have a relatively easy time at the outset playing prospective underwriters against each other to keep rates low. But as the amount insured climbs past $200 million, the insurers who have yet to join the coverage are less likely to face competition and often can command higher rates in exchange for completing the package. These rates are then applied to the total package.

Aon recently announced that it has become the biggest space insurance broker for operators in the EMEA — Europe, Middle East and Africa — region following its win of the insurance business from satellite-fleet operator Eutelsat S.A. of Paris.

Aon is assembling insurance coverage for Eutelsat’s Hot Bird 7A and Hot Bird 8 direct-broadcast television satellites, under construction respectively at Alcatel Alenia Space and EADS Astrium. Aon is also the principal space-risks broker for Inmarsat plc of London, Thuraya Satellite Telecommunications Co. of the United Arab Emirates and Rascom of Africa.

Marsh and Aon brokered a five-year, umbrella insurance policy for the European Space Agency (ESA) of Paris. The five-year policy, which expired this year, was put to the test following the 2001 failure of the Ariane 5 rocket carrying ESA’s Artemis navigation and telecommunications research satellite.

“It became clear after the Artemis claim that insurance underwriters were trying to apply commercial telecommunications satellite standards for loss on what was essentially a research and development satellite,” Montpert said. “It is clearly something that still needs to be discussed in detail, whether it’s for telecommunications, navigation or Earth observation satellites. The market is not used to evaluating these types of missions.”

Aon recently brokered a $500 million third-party-liability insurance policy for one of the companies responsible for Europe’s Egnos satellite navigation system. Montpert said he believes the policy is among the first of its kind.

Egnos is Europe’s contribution to a global system that provides a geostationary satellite overlay to verify the accuracy of the U.S. GPS navigation and timing satellite constellation.

Egnos, which includes terminals aboard the Artemis satellite and two Inmarsat spacecraft linked to a network of ground installations, is scheduled to be introduced commercially in 2006. The United States and Japan have similar GPS-overlay satellite hardware in orbit.

“You could argue that the likelihood that, for example, a plane crash is caused by an Egnos failure is small,” Montpert said. “But the cost of coverage also was small, and we all know that when accidents like this happen, victims’ representatives seek responsibility pretty much everywhere they can find it.”

Montpert declined to name the Egnos insurance policy customer. Europe’s Galileo satellite navigation system, expected to be operational around 2011, also will be seeking a broad insurance package. Unlike GPS, Galileo will be run by a privately owned consortium that will guarantee the accuracy of the Galileo signal.

Peter B. de Selding was the Paris bureau chief for SpaceNews.