By Nick David, Editorial Lead, SatNews
Satellites used for military purposes are increasingly seen as legitimate targets. That is exactly the risk satellite insurance won’t cover.
“Right now, those are not insurable risks. These are excluded events,” Tim Rush, a senior partner at Gallagher Aerospace, said Thursday in a talk on the new space insurance market at Silicon Valley Space Week’s MilSat Symposium. Gallagher is one of the world’s largest insurance brokers.
It’s now widely reported that there are weapons in space, Rush said, and “reasonably well accepted that satellites can be legitimate targets when they’re used for military purposes.” Satellite property policies are written on an “all-risk” basis, covering failures, malfunctions and loss of use. But the exclusions page lists war in several forms, and cyber as well.
War coverage would still have holes
A separate war-risk market exists for airplanes and ships, and the International Union of Aerospace Insurers made space war risk a big topic at its annual meeting this year, Rush said. Coverage isn’t available yet because demand hasn’t materialized, which he called a chicken-and-egg problem.
Even if it is offered, it will be “imperfect,” he said. Policies could cover war, invasion and hostile acts, but not conflicts involving the world’s major nuclear powers. “If the war risk involves the U.S., the U.K., France, Russia or China, then it’s going to be excluded.”
The clearance problem
National security programs barely use the market today. The space insurance market has averaged about $500 million a year in premium in recent years, Rush said, and less than 1% of that has gone toward national security programs.
The obstacle is information. Underwriters need to understand a satellite’s architecture, redundancy and margins to price it, and for national security programs that information is classified. Among cleared insurance professionals, “a couple of underwriters and a couple of brokers is it,” Rush said, so companies that want coverage often can’t get it.
Only a defense contractor working under a program of record can nominate and sponsor an insurer for a clearance, which brings real cost and delay, he said. Rush suggested the Space Force’s new ACES program, which Col. Tim Trimailo described Wednesday as a way to help early-stage companies get clearances, could also help clear insurers.
He also had advice for acquisition officials vetting young companies: check their insurance and risk management, too, so that a mishap on the factory floor doesn’t bankrupt a supplier.
