Learning from 2014: Insuring launch risks

22 August 2014 was to have been a special milestone for the European navigation system GALILEO: the first two of its 30 planned satellites were launched into space from Kourou (French Guiana) on a Soyuz launch vehicle. But the celebrations had to be put on hold, because the satellites were inserted into the wrong orbit, well below the planned altitude of 23,522 kilometres. After temporary icing-up of the fuel leads, not enough fuel was supplied to the launch vehicle engine, with the result that the satellites had to be inserted in orbit earlier than planned. They are now orbiting at an altitude of 17,000 kilometres – which makes the launch a fiasco from the European Space Agency's (ESA) perspective, since in all probability both satellites will be lost for operational purposes. The two satellites with an estimated cost of more than 50 million euros were to form the basis for developing the European competitor to the US Global Positioning System and Russia's GLONASS system. Since only satellites in commercial space projects are currently insured, the EU (as ESA's principal) and therefore European tax payers will have to bear the loss.

Government space organisations have been affected by high losses again and again: At the end of October 2014, for example, an Antares launch vehicle built by US manufacturer Orbital Science exploded just seconds after launch. The launch vehicle with the unmanned private cargo spacecraft "Cygnus" was meant to supply the International Space Station with supplies and scientific materials on behalf of the United States National Space Agency (NASA). The loss of the Antares launch vehicle, together with the transporter and the supply materials, is estimated at over 200 million US dollars.

Whereas in the past, government space programmes were allocated high budgets and were therefore able to absorb major losses, cost pressures are now rising and there are far fewer resources available. Major losses can destabilise ambitious government space projects and result in high costs for the general public. The commercial launch vehicles used are insured by the international space insurance market and by Munich Re, but the satellites in the government programmes have not been covered up to now. "Although scientific satellites are difficult to insure because of their prototype character and the high costs involved, we would be prepared at any point to cover solely the launch risk," explains Christian Riedl, head of the Space Department.

Space insurance is roughly divided into three forms of cover, reflecting the various phases involved, from preparation and launch to operation of the satellite in orbit. Munich Re therefore offers the following covers: pre-launch, launch, and in-orbit insurance.

Pre-launch insurance: Pre-launch insurance provides all-risks coverage for material damage in the pre-launch phase. In other words, while the satellite is being taken from the manufacturer to the launch site (the transportation itself is often covered under a separate marine policy), while it is being given its launch configuration and integrated into the launch vehicle, and while all the preparations are being made for the launch itself.

Launch insurance: Launch insurance covers the phase from the launch vehicle lifting off from the ground to the satellite separating from the launch vehicle and the insertion of the satellite into the "correct" orbit. It generally also covers the satellite's first year of operation. A partial loss is assumed if the satellite becomes only partially operational or if its service life is shortened. Once the impairment from a partial loss exceeds a certain threshold, we speak of a constructive total loss.

In-orbit insurance: In-orbit insurance offers protection against the risk of a satellite's complete or partial failure during the operating phase. As with launch insurance, the insured value is an agreed value, which is based on the replacement value at the start of the satellite's service life. The sum insured thus covers the total cost of manufacturing and launching a replacement satellite into orbit. In addition to the material damage insurances described, Munich Re offers an innovative launch plus life cover for a satellite service life of up to 15 years from the launch.

In the case of GALILEO, if the project had included insurance protection from the start, it would only have meant a minimal increase in the budget for the entire programme, but would have secured cost compliance even with major losses, and thus provided the project as a whole with a greater level of planning security. You can find further information on space insurance, together with technical background details, and an introduction to our colleagues in the Space Department in our Touch Space information portal.