FAA launches space liability rules

[MILAN, Italy]—U.S. state and federal regulators are helping to ignite the launch of the space tourism industry by laying down rules which specify the safety, insurance and liability requirements for human space flight.

In an effort to spur on the fledgling industry, the U.S. Federal Aviation Administration issued its final rule on Feb. 13, which establishes requirements for human spaceflight as required by the Commercial Space Launch Amendments Act of 2004.

The "final rule," as it is known, includes requirements for crew qualifications and training; informed consent for crew and space flight participants; and acceptable levels of safety for the general public, as well as passengers.

One small step

The FAA rule applies to space vehicle launches or landings from the United States, which require a license from the U.S. government. The Commercial Space Launch Act was passed in 1984 at the dawn of the commercial space market for privately held launch vehicles to rocket satellites into space. The 1984 law requires U.S. citizens to obtain a license prior to conducting the launch of the rocket, with the only exception being for missions that are conducted by and for the U.S. government.

The FAA rule also specified financial responsibility for each company that is licensed by the FAA to fly in space, according to the regulation. In particular, the rule:

• Requires that each licensee carry third-party liability insurance to a limit that is calculated by the U.S. government
• Specifies that the maximum probable loss for bodily injury will not exceed $500 million (€372.36 million) and for property damage will not exceed $100 million (€74.47 million)
• Provides a waiver of liability above $1.5 billion (€1.12 billion), with the government paying the difference between what the licensee can buy in the insurance market and the upper limit

Meanwhile, in April, the state of Virginia's House of Delegates passed 99-0 the Spaceflight Liability & Immunity Act as amended by Governor Timothy Kaine. The bill, which must be passed by the state's Senate and signed by the governor to become law, would provide commercial spaceflight operators with immunity from liability as long as the participants have signed a waiver warning them of the danger. This legislation will apply to flights from Virginia only, home to the Wallops Flight Facility, an operational installation for suborbital and orbital flight projects owned by the National Aeronautics and Space Administration. The bill is expected to become law by July and expire in July 2013.

"The FAA has been very supportive" of commercial human space flight, said Jonathan Firth, project director for Virgin Galactic, the world's first "spaceline" owned by Richard Branson's Virgin Group Ltd. in London. U.S. states such as Virginia also are putting forward legislation to define spaceflight liability and provide the wording for waivers of liability to be signed by spaceflight passengers, he said.

In Europe, however, regulators have been slow off the mark to provide legal parameters for human spaceflight, according to Sean Gates, senior partner for Gates & Partners in London. "In the European Union, we're boldly forward in going slow on that," he told the 14th International Space Insurance conference organized by Pagnanelli Risk Solutions Ltd. in Milan last month.

Meanwhile, insurers must also step up to the galactic plate to lift the commercial space tourism industry off the ground, say representatives of the commercial spaceflight companies. The companies are aware that insurers have reservations about this extremely risky adventure for the very rich. That's the reason why Virgin Galactic attended a panel moderated by Mr. Gates on "Space Tourism & New Technologies" at the space insurance conference.

Tickets please

"Virgin Galactic sees this as a great opportunity to gauge the interest of the insurance community in covering Virgin Galactic and our spaceflight participants, as well as understanding your concerns and what we can do to address them," Mr. Firth of Virgin Galactic told the audience.

Virgin Galactic is on target to launch its first commercial flight from a spaceport in New Mexico in 2009, according to Mr. Firth. The company also plans to launch from a spaceport in Sweden in the future.

The spacecraft, known as SpaceShipTwo, would launch six physically-fit passengers into lower earth orbit for just four minutes to experience weightlessness and the sight of the earth from space, said Virgin Galactic's astronaut Brian Binnie.

Virgin Galactic plans to launch 500 people into space in its first year of operation and more than 50,000 within 10 years, said Mr. Firth.

Travel insurance

What will be important to the future of spaceflight is the price of insurance, according to Mr. Binnie. Although he realizes that the "volatility" of spaceflight will be a factor when charging premiums, he noted that there isn't always a rhyme or reason for the calculations.

Indeed, it cost more in premium to insure SpaceShipOne when it was ferried to the Smithsonian National Aeronautics Space Museum in Washington D.C. than it did to buy liability insurance when the spacecraft was flown by Mr. Binnie in October 2004 to become the first private manned spacecraft to exceed an altitude of 328,000 feet twice within the span of a 14-day period.

Virgin Galactic will negotiate early with underwriters to explain the risks and the company's insurance requirements, said Mr. Firth. "We encourage the insurance community to take a pragmatic approach on pricing risk, and on exclusions, so as to foster the personal spaceflight industry," he said.

Industry meet in Milan

[MILAN, Italy]—More than 300 delegates from 27 countries attended the 14th biennual International Space Insurance Conference in Milan, Italy on March 22 and 23.

The two-yearly conference was started by Benito Pagnanelli when he was head of the aviation and space department at Assicurazioni Generali SpA in Trieste, Italy.

Mr. Pagnanelli spearheaded this unique conference in 1979 to bring satellite manufacturers, operators, and launch vehicle operators together with brokers, insurers and reinsurers.

After he left Generali as deputy general manager in 2001, Mr. Pagnanelli set up his own consultancy and is president of Pagnanelli Risk Solutions Ltd., which is registered in London with a representative office in Milan.

The next conference should be held in 2009, which would be 30 years after the first event, says Mr. Pagnanelli. No date is yet set, however, nor the Italian venue, although it could be in Venice, Rome or Taormina in Sicily, he said.