Written by staff writer.
The United Kingdom is looking to build on its longstanding reputation as a global insurance hub to become a key player in the multi-billion dollar space insurance industry. But the UK’s pitch to insurers comes as the nature of the space insurance industry changes.
“London is the only city where every top 20 insurance and reinsurance firms are active. This gives the UK an unmatched global reach,” Susan Oliver, Counsellor at the UK’s Department of Business and Trade, Defence Cyber, Security, Space and Aerospace, told the recent SpaceTide conference in Tokyo. “The space insurance industry dates back nearly 60 years with Lloyds of London writing the first space insurance policy in 1965.”
Oliver says space allows the insurance industry to capitalize on a unique risk environment. Space insurance has never been inexpensive, but premiums had been trending down over the long term until recently. A handful of high-profile failures around four years ago saw space insurance premiums double or triple overnight as the insurance industry sought to recoup their losses.
In profitability terms, 2020 was also a close shave for insurers. However, since 2021, space insurance has proved profitable again, and premiums have subsided to pre-2019 levels – about 5-20% of the policy value. In 2022, the global space insurance industry generated about USD282 million in profits.
The insurance industry has historically covered big-ticket items like geostationary satellites, which can cost hundreds of millions of dollars. But the commercialization of space and the advent of small low Earth orbit (LEO) satellites is changing the nature of the space insurance business and challenging the way longstanding insurers in established insurance hubs like London do business.
Christopher Kunstadter, Global Head of Space at AXA Ltd, a French multinational insurance company, also speaking at SpaceTide, says he’s seen a lot of changes in the types of satellites and launch vehicles deployed and, consequently, changes in the way space insurers look at risk. However, he argues that space insurance remains a critical enabler of innovation and investment.
“We allow organizations and enterprises to take a risk, and we facilitate the investors to support them, which is a very key part of the space landscape,” he said. “But risk is changing in space. We see tremendous developments in technologies and applications, with new launch vehicles, new satellites… many different things that we would not have imagined ten or 15 years ago.
“Along with that comes a more congested space environment and new threats from cyber and conflict in space. We really have to look very closely at risk, but to mitigate those risks, we support space and responsible space activity and incentivize good behaviour. As insurers, when it comes to space, we embrace risk.”
Oliver says the UK tech industry, which her department classes the space sector as part of, is worth over USD1 trillion, lagging only the United States and China and ahead of Europe. She says the UK government wants to “cement’ the country as a science and technology “superpower” and that doing so is vital to economic growth.
One of the key changes in the space and space insurance sector has been the proliferation of small satellites in LEO. But only about 1% of those satellites are insured. “The rise in small satellites has really affected the space insurance market,” said Kunstadter. “The landscape has changed because a company that launches hundreds or even thousands of small satellites can afford to lose a certain number. As a result, many of the operators of LEO constellations don’t buy insurance once the satellites are up in orbit. They have spatial diversity, and there are plenty up there that they can use.”
But Kunstadter says the increasing number (approximately 5,000) of LEO satellites is posing a growing collision risk, and the lack of small satellites insured for that is concerning, and that’s forcing some change in the insurance industry, with some insurers (including ACA) starting to offer collision only insurance cover.
Paul Aitchison, the class underwriter for the Nebula Space Consortium at Ascot Underwriting Limited, is based in London and helping drive the UK government’s push to lock in that city as a space insurance hotspot. Ascot is a Lloyds of London syndicate, but his customers are a long way from the sea mariners that Lloyds built its reputation underwriting. The Nebula consortium provides around USD13 billion worth of space insurance to clients around the world.
“We’ve seen large losses occur,” he admitted at SpaceTide. “We’ve had to endure payments of claims, but that’s what the insurance industry does. In terms of enabling space business, I often have clients say that if it was not for insurance, they wouldn’t be able to raise the finance to even start thinking about launching their spacecraft.”
He says competitors across the space insurance industry are seeing the same developments and challenges, and evolving to meet both is important. While Kunstadter spoke about the growing need for collision risk, Aitchison sees Ascot playing a bigger role in offering launch vehicle flight-only insurance to owners of LEO satellites, who typically pay a private operator like SpaceX or Rocket Lab to get their satellite into position to deploy into orbit.
“Launch vehicle flight cover will cover for the failure of the launch vehicle. It will cover for delivery into incorrect orbits or even some sort of catastrophic destruction,” Aitchison said. “What it does is provide financial protection for new companies or companies providing services via small satellites.”
While some operators will continue to push with boundaries in space, going further with more expensive payloads, Kunstadter and Aitchison say that the nature of space insurance is changing. Ascot Underwriting running the Nebula consortium from London is an own goal for the UK government and its vision of transforming that city into a space insurance hub. Nonetheless, whether the UK government can move beyond a stated target and put the appropriate incentives and support into place to reach that goal for the space insurance industry remains to be seen, and that’s before considering the changing nature of cities and workforces and whether the whole concept of one city as a focus point for any professional service industry remains a valid one.
