WASHINGTON, D.C. – In the near term, volatility in launch insurance and in-orbit coverage will continue as satellite manufacturers and launch services providers struggle to improve their fleets of satellites and rockets. This could help drive down the cost of insurance to more acceptable levels.
“Losses will continue in the satellite sector,” said Christopher Kundstadter, executive vice president at U.S. Aviation Underwriters. “The underlying satellite market will continue to be fragile and volatility in the insurance market is not going away, it is increasing.” Kundstadter made his remarks here last week at a panel session during the SATELLITE 2003 show.
Mark Quinn, senior vice president at Willis Inspace, said that there are a number of trends impacting the space insurance market currently, including: changing policy period durations; altering coverages and exclusions; and declining market capacity to insure.
Jean Michel Eid, managing director of Aon Space, told the audience that he believes the top trends driving the insurance market today are the changing capacity of the insurance industry to write policies due to markedly increased claims (at last count, $400 million and rising); hardening policy terms; in-orbit delivery issues; and, most importantly, swapping out reliable technology for new and unproved technology.
“Why do we always change proven technology?” Eid asked. “It is tough to rate the new technology when the older versions are performing so well.”
Eid praised the insurance claim records of Inmarsat, Eutelsat, Intelsat and Iridium, citing their long lineage of engineering management expertise and few satellite insurance claims. “The industry has to demonstrate improved reliability, otherwise more blood on the carpet is likely to result in more [insurance underwriters] withdrawing from the market.”
Echoing Eid’s comments. and striking a much more upbeat tone, was Roger Bathurst of International Space Brokers. Bathurst said that insurers have become too cautious in their requirements, which has resulted in an “almost puritanical reluctance to insure at all.”
Bathurst chided his colleagues on the panel to become less “bearish” and admonished them to adopt a policy of “trust and mutual confidence,” whereby insurers become partners in the business planning process and stop “second guessing the satellite engineers.”
Saying the glass was “half full and not half empty,” Bathurst praised Lockheed Martin [LMT] for 63 successful consecutive launches, Intelsat’s 40-plus years of no in-orbit insurance claims; the Ariane 4 program; and Boeing Satellite Systems’ HS 376 fleet for above-average industry performance and reliability.
Delbert Smith, senior counsel with Jones, Day, Reavis & Pogue, said the United Nations was “very close” to coming to a consensus on future language (possibly through an international treaty) about the ever-present problem of orbital debris. –Dave Bross
