More satellites are going up, but losses are not

Workers ready a Chinese navigation satellite for launch. The satellite was put into orbit last December from a launch center in Xichang./ AP

The space industry is booming, but experts say insured losses have been relatively low in recent years.

Somewhat insulated from the economic downturn, the number of satellites being built is down only slightly from few years ago, said David Todd, London-based aerospace analyst at Ascend Worldwide Ltd.

New technology, demand for bandwidth, and an increasing number of governmental and military satellites have helped maintain demand, Mr. Todd said.

In addition, a significant number of satellite launches are in the pipeline for the next three years, said Pascal Lecointe, Paris-based underwriter at Hiscox Ltd. “This will translate into a good flow of underlying business to insurers in premium,” he said.

Despite relatively high levels of launch activity, insured losses have been modest, experts say.

Total insured losses in 2010 were $378.5 million, which were more than half of the space sector's estimated annual gross premium, said Mr. Todd. That compared with losses of $428 million in 2009 and $375.2 million in 2008.

“The last bad year for space insurers was 2007, when losses of $871.6 million exceeded gross premiums of $650 million. Other than 2007, the sector has been relatively stable, having been profitable since making a loss in 2002,” Mr. Todd said.

In-orbit insured losses were $375.5 million in 2010, mainly from the $343 million loss of a Eutelsat Communications satellite in October, according to Ascend Worldwide.

Other insured losses included the failure of a Chinese government-owned ChinaSat 6A fuel system ($22 million), the temporary failure of a Galaxy 15 satellite ($6.5 million), and a communications malfunction on the Amazonas 2 ($4 million).

There was only one insured launch failure in 2010 and that was relatively small—a $3 million insured loss of a Proton-M rocket that was carrying three Glonass M navigation satellites in December. However, the uninsured loss was much higher.

In total, there were four launch failures out of 74 attempts in 2010. Apart from the Proton-M failure, there was the June failure of a South Korean KSLV-1 rocket and two launch failures involving Indian GSLV rockets in April and December.

While fuel issues were the most prominent causes of insured in-orbit losses in 2010, no loss trends emerged during the year, said Mr. Todd. “Losses are now lower than the early 2000s because of tighter policy conditions and general improvement in launch and satellite reliability,” said Mr. Todd. “The real danger is from falling premium rates, which may result in premiums eventually being outweighed by losses in a given year.”

Most insured losses are from launch failures or malfunctioning satellites, said Jan Schmidt, head of space insurance and reinsurance at Zurich-based Swiss Reinsurance Co. But underwriters are cognizant of potential losses from solar weather and space debris, he said.

“In recent years, there have not been any major anomaly losses or claims from solar flares. However, cover is provided for these exposures under all-risk policies,” said Mr. Schmidt.

Underwriters anticipate that anomaly claims could rise because of increasing space debris and projections that solar weather activity will increase in 2013, he added.