The first privately owned spaceship to rendezvous with the International Space Station launched a new era in space flight last week, but experts say the space insurance market remains volatile despite the increase in commercial launches.

In a demonstration mission under NASA's Commercial Orbital Transportation Services program, Space Exploration Technologies Corp.'s Falcon 9 rocket launched from Cape Canaveral in Florida and docked at the ISS last week, and is to return to earth this week.

Jan Schmidt, Zurich-based head of space corporate solutions at Swiss Re Ltd., said that with roughly 20 to 25 insured commercial space launches a year, they remain relatively rare events.

“One of the biggest challenges is the volatility of the space insurance market, because we only have a limited number of insured risks per year, but each risk has a high insured value,” Mr. Schmidt said.

With the end of NASA's space shuttle program, the federal agency awarded SpaceX a 12-launch, $1.6 billion contract to ferry supplies to the ISS until 2016. Because the SpaceX vehicle was launched from the United States, it is licensed by the Federal Aviation Administration and needs third-party liability insurance.

“NASA self-insured all the shuttle missions, so now we have the opportunity with private launch companies such as SpaceX to insure their missions,” Mr. Schmidt said. “This is a great opportunity.”

Despite the historic nature of the company's flight last week, SpaceX's plans to launch commercial satellites will have a greater effect on the space insurance market, Mr. Schmidt said.

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Currently Reston, Va.-based International Launch Services Inc., which uses Russia's Proton heavy-lift rocket, and Evry, France-based Arianespace, which uses the heavy-lift Ariane 5 rocket, dominate the market. The addition of SpaceX and other companies creates opportunities and challenges for insurers.

“When new technology is introduced, the risk assessment and underwriting is challenging for underwriters because you don't have any historical failure data,” Mr. Schmidt said. “Space insurers like flight-proven hardware, so new launch vehicle companies will initially pay higher launch insurance premiums until they are well-established and have made some progress on the learning curve.”

In the case of SpaceX, this unease is amplified by the relative newness of the Hawthorne, Calif.-based launch company, which was formed in 2002, said Thierry Colliot, head of aviation for France and general manager of SpaceCo, a Paris-based subsidiary of Allianz Global Corporate & Specialty. “New technology is coming into a very traditional industry,” he said.

Chris Kunstadter, New York-based senior vp at XL Insurance, expressed confidence in SpaceX and NASA's oversight of the program, adding that XL insured a small payload that was part of last week's flight.

“As with any new technology, we are always a bit nervous; but in this case, you have some flight history as well as NASA looking over their shoulder.” Mr. Kunstadter said. “As far as we are concerned, it's being done the right way.”

Jeff Poliseno, Washington-based CEO of Aon Risk Solutions' international space brokers practice, a unit of Aon Corp, also lauded SpaceX's safety efforts.

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“From the viewpoint of our customers, the satellite operators, SpaceX has become a commercially viable option in a market that is extremely narrow,” he said.

“The sentiment grows more positive by the day in the commercial insurance market from the insurance carriers' point of view. They are taking all the right measures that insurance companies like to see from a risk management and mitigation standpoint,” Mr. Poliseno said.

Despite the mission's successes, Mr. Kunstadter, said space flight is inherently risky, and all parties involved need to guard against complacency.

“We wouldn't say that the industry has matured to the point where this is routine,” he said. “The manufacturers are always trying improve capability and performance, which means making changes. And every time you make a change, you introduce more risk.”

Mr. Schmidt noted that insurance premiums are proportional to the track record of the company. While the market has sufficient capacity and prices have been stable, this could change rapidly with a single accident.

“Just one big Ariane 5 launch failure with two insured satellites on board could, in theory, wipe out the entire annual premium income of the space insurance market,” Mr. Schmidt said. “That's why everyone involved is so nervous before launches.”