Insurance Article, The Insurance Times 2020, The Insurance Times March 2020

“ISRO” SETS THE TONE FOR SATELLITE INSURANCE WITH STRESS ON BUDGET

Satellite insurance is a specialized branch of aviation insurance in which, as of 2000, about 20 insurers worldwide participate directly. Satellite insurance blasted into the spotlight when a European Vega rocket failed about two minutes after lift-off from a base in French Guiana, destroying a United Arab Emirates military observation satellite in the process. According to a Reuters report, the combined insurance policy for the rocket and satellite totaled 369 million euros (US$415.57 million), making the incident possibly the largest ever space insurance loss to be incurred by the industry. The first satellite insurance policy was placed with Lloyd’s of London in 1965. It was designed to cover physical damages on pre-launch of Intelsat 1 – known as the Early Bird – which was the first commercial communications satellite to be placed in geosynchronous orbit. This satellite enabled direct and nearly instantaneous contact between North America and Europe via television, telephone and fax transmissions. Since then, the number of insurers engaging in aerospace activity has increased alongside the fast commercialization of space. Stating the obvious – satellites are expensive! It can cost billions of rupees to complete a satellite project, through the planning, manufacturing, testing, and eventual launch stages. In correlation with this, it really is only the major global insurance firms with the deepest coffers who are able to entertain the notion of providing satellite insurance.

The year 2019 was probably one of the best years for the Indian Space Research Organization (ISRO). Not only did ISRO make a mark in the field of space science and technology with Chandrayaan 2, but the organization also formed interesting collaborations with industry and academia within the country as well. ISRO successfully accomplished 13 missions including 6 launch vehicle missions and 7 satellite missions during the year 2019.  50 foreign satellites from 7 countries were launched on a commercial basis during this period. ISRO, in the year 2019, aroused the interest and curiosity amongst school children as well in the field of space science and research. The year 2019 witnessed the ISRO touching the mark of 319-foreign satellite launches; deciding to go for another moon landing mission called Chandrayaan-3; setting up Human Space Flight Centre; starting the young scientist programme; signing agreement with Indian Air Force (IAF) to select and train Indian astronauts for the country’s manned mission. The space agency also laid the foundation stone for a centre to monitor and protect high value space assets from space debris. During 2019, ISRO launched several earth observation satellites like the Emisat, an electronic intelligence satellite for DRDO, Cartosat-3, radar imaging satellites RISAT-2B, and RISAT-2BR1.  In the communication satellite space, the ISRO launched the country’s 40th communication satellite GSAT-31 by an Ariane 5 rocket belonging to Arianespace. On the rocket side, while ISRO flew its 50th PSLV and also launched two new variants of the rocket- PSLV-DL (with two strap-on motors) and PSLV-QL (with four strap-on motors). The year also saw ISRO putting into orbit 50 foreign satellites for a fee and also flying the 50th PSLV rocket. PSLV has lifted a total of 52.7 ton till date and out of that 17 per cent consists of customer satellites. The space agency has several more missions lined up in 2020 including the inaugural flight of the new rocket SSLV.

Launches by ISRO in 2019 and in future:

Let us now take a look at some memorable and impactful events that ISRO managed to create in the country in the year 2019

  1. The year began with ISRO successfully launching Microsat-R and Kalamsat-V2 onboard the PSLV-C44 vehicle.
  2. GSAT 31 communication satellite was launched from Kourou, French Guiana onboard Arianespace rocket on 6 February 2019.
  3. Launch view gallery along with a Rocket space garden was launched in Sriharikota to enable nearly 5000 people to watch ISRO launches live.
  4. EMISAT was successfully launched onboard PSLV-C45 on 1 April 2019.
  5. RISAT-2B radar imaging earth observation satellite was launched onboard PSLV-C46 on 22 May 2019.
  6. The launch of GSLV-MK III M1, India’s most powerful launch vehicle, was accomplished on 22 July 2019. The mission carried Chandrayaan-2 Orbiter spacecraft to its intended orbit. The instruments are continuously providing very useful science data.
  7. Cartosat-3, a third-generation agile advanced satellite having high-resolution imaging capability, was launched by PSLV-C47 on 27 November 2019.
  8. PSLV-C48 launched RISAT-2BR1 radar imaging earth observation satellite on 11 December 2019.

Chandrayaan-3 might be insured; a first in four decades –

While indigenous launch missions were not insured so far, ISRO has since 1982 been insuring all its overseas launches which have been through partnerships with Russia, US etc. The insurers typically have been New India Assurance and the other three other public-sector companies backed by reinsurers. With the rapid growth of Science and Technology, the Government of India has laid special emphasis on the development of Space Technology in the country. Obviously, this type of high technology business could not be commercially developed without insurance protection. In the last 44 years, since the launch of its maiden satellite Aryabhatta in 1975, ISRO has never insured its indigenous space ventures. Two factors are now influencing the space research organization to revise its stance. The first is the unintended setback in Project Chandrayaan-2, which cost nearly Rs 1,000 crore and second, the success of ISRO’s Mars mission, which has brought down reinsurance rates for India’s space exploration. These developments are prompting ISRO to talk with insurers for coverage of its future domestic launches (including Chandrayaan-3).

One of the early claims was in the April 1982 launch of the Indian-US venture INSAT-1A which was launched by a Delta rocket. By September, INSAT-1A’s altitude control propellant was exhausted, and the communications satellite abandoned, resulting in a claim payout of $12 million to ISRO. Later when INSAT-1C and INSAT-2D also died in orbit, insurance was available as a safety net. Of nearly 75 satellites launched by ISRO, less than a quarter have been insured – as the organization till date has not seen any point in insuring domestic launches. When it comes to foreign joint ventures – it’s the foreign joint ventures – it’s the foreign space agency which usually has insurance as a clause. And that is why ISRO compiled and bought insurance. But Chandrayaan-2 now has set the agency rethinking on how to curtail losses in its pursuit of scientific exploration,” said another source. Previously New India, the sole underwriter of satellite policies in India for ISRO, had insured GSAT-21, GSAT-10, INSAT-3D and GSAT-7. It has also covered GSAT-16 launched in December 2014 and the prelaunch expenses of GSAT-15 schedules for 2015 launch. For India’s eleventh communication satellite GSAT 16 December 2014. New India has covered it up to six months of launch for Rs 341.50 crore. The insurance of INSAT-1A required the then department of space secretary and New India to travel to London to conclude reinsurance. The team needed the support of underwriters in both London and the US market to cover the programme. For later programmes, New India reinsured with underwriters in London and Munich. Now, specialist underwriters fly down to India to underwrite ISRO’s satellite programmes.

India lost Rs 256 crores in one minute:

Indian Space Research Organization confirmed that neither the launch vehicle, nor the satellite — on which ISRO spent Rs 160 crore (Rs 1.6 billion) and Rs 96 crore (Rs 960 million) respectively — was insured against any mid-air or space disaster. They did not insure satellites that are launched from India. But they have insured every satellite that ISRO has launched from foreign stations like Kourou in French Guyana. Indian satellites launched from foreign soil have been insured with New India Assurance, a public sector Indian company that has been the traditional insurer for ISRO’s programmes. For instance, ISRO had insured the Rs 250 crore (Rs.2.5 billion) INSAT-4A — launched from Kourou by Arianespace — for a premium amount of Rs 92 crore (Rs 920 million). Though New India Assurance issues the insurance policies to ISRO for foreign launches, the risk factor was taken care of by international re-insurer Spaceco of the Allianz group, which is the world’s largest space insurer. But why are satellite launches from Indian space stations not insured? The simple reason is that New India Assurance is a government company and ISRO is a government agency. The loss in a space disaster, in any way then, is the government’s. But in space insurance schemes, the launch vehicles (the GSLV-F02) are not insured as they are designed to break up in various stages before the satellite is put into orbit. That means the insurance covers only the satellite and the mission cost. The launch cost of the INSAT-4C mission was around Rs 220 crore (Rs 2.2 billion), which included the satellite cost of Rs 96 crore (Rs 960 million). The remainder was the mission development cost.

ISRO has not been insuring the indigenously launched satellites:

ISRO has not been insuring the indigenously launched satellites because of its association with New India Assurance, and also because the premium is huge. In Western countries, the insurance premium for satellites is over 25 per cent. In this case, ISRO could have had to pay a yearly premium of Rs 55 crore (Rs 550 million) on the INSAT-4C mission. That is indeed a huge sum. Space insurance was a relatively new area in India. And because the risk involved is huge and complex, not many private insurance companies have taken keen interest on it. ISRO is looking at international insurance companies — most of whom have set up shop in India — to insure satellites. To tackle the problem of space disasters, ISRO is also planning alternative approaches to insurance. One such idea is to build up in-orbit spare satellites so that even if one satellite fails, the spare one is put in place. ISRO can develop extra satellites with the hefty insurance premiums that we have to pay insurance companies each year. Large space-fleet operators like Intelsat, PanAmSat or SES Americom always put up extra satellites to take care of any contingencies. But it is not an easy solution, as the preparation and launch of each satellite takes years of research and development. The failed INSAT-4C mission have been insured for Rs 220 crore (Rs 2.2 billion).

Incidentally, ISRO has received insurance compensation from satellites launched from foreign soil when the INSAT 1A and 1C failed, and the INSAT 2D died in orbit. The apex Indian space agency got about Rs 240 crore (Rs 2.4 billion) as insurance compensation for the failure of INSAT-2D. ISRO May Be Paid $65m Insurance For Defunct Satellite. The ISRO is likely to be paid about $65 million as insurance by the consortium of Indian insurance companies for the abandoned Insat-2D satellite. ISRO making the final assessment on the damage and loss of the satellite and it will be over any time now, New India Insurance Company, which leads the consortium. International experts had been requisitioned to assess the damage caused to the satellite. The final decision on the repayment structure would be made based on their report. However, preliminary assessment was that ISRO would have to be paid to the tune of $65 million for the defunct satellite. An exact figure will be arrived at only after receiving the expert committee report. Repayment from the company’s pocket would be less as the satellite had been re-insured with a consortium of insurance companies led by Lloyds in the United Kingdom. Since 95 per cent of the risk had been borne by this international consortium, Indian insurance companies would have to pay only five per cent of the repaym. Insat-2C, 2D and 2E had been insured for $100 million each by paying a premium of $10 million each. ISRO had also staked a claim for $65 million for the partial loss of Insat-2C, taking the total claim made for the two satellites to $165 million. However, it was unlikely to be paid the entire amount as the package of insurance for the three satellites had a clause to deduct $100 million. Insat-2C, 2D and 2E cost ISRO $40 million each for design and $62 million each for the launch, and hence the cost of a launched satellite was $100 million. Earlier, the consortium led by the New India Insurance had paid ISRO $64 million for the loss of Insat-1A in 1982 and $72 million for the failure of Insat-1C in 1988.The 2070 kg Insat-2D, launched in June by a French rocket, failed in October following an on-board short circuit rendering the transponders useless. Insat-2D was the first to fail among the second generation satellites.

Space insurance costs to rocket after satellite crash:

Space rockets and satellites are likely to cost more to insure after the European Vega rocket crash which hit insurers with a record space market loss of 369 million euros ($411.21 million). The Vega rocket carrying a military observation satellite for the United Arab Emirates veered off course shortly after take-off and crashed. Prior to the accident, Italian aerospace company Avio Aero, which built the Vega, said it had a 100% success rate. The insurance loss for the rocket and satellite represents the largest recorded loss in the space market. Until now, insurance premiums for commercial satellite and rocket accidents have been falling due to strong competition among insurers and improved rocket reliability. But that could change in the aftermath of the Vega crash, leading to higher costs for space rocket launches. Space insurers have suffered two major claims within the past year and the cost of these losses far exceeds the premiums earned in this sector, which is backed by major reinsurers Munich Re and Berkshire Hathaway. Insurance rates for both launch and in-orbit have been at historically low levels and need to increase significantly. The Vega loss follows the failure of Maxar Technologies’ WorldView-4 imaging satellite resulting in a $183 million insurance claim. Space rates could double as a result of this (Vega) failure combined with poor results. The Vega loss alone was expected to cancel out the whole of 2019 global space premium, with further launch and in-orbit risks still remaining for the year. The government has increased the allocation for the Department of Space to hit ₹13,479 crore this year. The ISRO has ambitious plans in the near future with Chandrayaan 3, Gaganyaan, and a new port in southern state Tamilnadu for small satellite launch vehicles (SSLVs). This is an 8% increase over last year. And a bulk of the allocation is towards space technology.

Types of Satellite Insurance coverage:

There were 114 space launches globally in 2018, according to Avio Aero, builder of the European Vega launcher. Unlike with most car insurance, cover for satellites or rockets is not compulsory. Only 60% of satellites launched in 2017 were insured. For those who do buy insurance, an all-risk policy covers damage of any kind and there is also liability cover available, in case a rocket hits something belonging to someone else. Space insurance providers include the specialist Lloyd’s of London market and insurance heavyweights AIG, AXA and Allianz, as well as reinsurers like Munich Re. Munich Re said it was one of the insurers of the Vega policy. Aon was the broker.  Space risk management has evolved in recent years. Now that space is becoming increasingly commercialized, insurance providers and risk managers have to think about more than just the launch of a vessel and satellite. Today’s lines of coverage include things like:

  • Satellite launch
  • Satellite in-orbit
  • Spacecraft pre-transit, transit and pre-launch
  • Satellite contingency
  • Satellite launch vehicle flight only
  • Satellite in-orbit third-party liability
  • Loss of revenue and business interruption
  • In-orbit incentives (failure to meet contractual obligations)
  • Production facility / launch pad property
  • Simply put, space and satellite insurance products tend to revolve around pre-launch, launch and in-orbit risks.

Global Aerospace said it did not insure the Vega launcher:

Prices to insure satellites against damage have fallen by 50% in the past two to three years. Space insurance premiums have dropped 75% in the past 15 years and 60% in the past 10. Rates are expected to bounce after the recent losses. But due to the intense competition in the insurance industry, a rise in premiums is not guaranteed. It hinged on whether significant insurance underwriting capacity started to leave the market. The company would be reducing its exposure to the space industry, as part of an overhaul of the loss-making division. Space tourism will add a new dimension as space passengers may also want insurance. U.S. space agency NASA plans to allow private citizens to stay at the International Space Station for month-long getaways at a cost of about $35,000 per night, with the first mission as early as 2020. British billionaire Richard Branson’s Virgin Galactic is also competing with Jeff Bezos’ Blue Origin in the race for spacSpace travel could straddle both the space and aviation insurance sectors. The advent of space tourism represents a completely new area of risk for insurers

India looking to buy first insurance policy for satellite

The Indian Space Research Organization (ISRO) is looking to buy its first insurance policy for a domestically launched space satellite, the first since it began launching satellites in 1975. Two factors are influencing India’s space agency to begin purchasing satellite insurance. First is an unexpected setback in Project Chandrayaan-2, which cost nearly INR10 billion (US$139.4 million), and second is the success of ISRO’s Mars mission, which brought down reinsurance rates for Indian space exploration activities. These have prompted ISRO to talk with insurers about the possibility of insuring future space projects, such as Chandrayaan-3. While ISRO has not insured launches conducted on Indian soil, it has typically insured launches done in partnership with other countries, such as Russia and the US. New India Assurance and other state-owned insurers were typically those tapped to provide cover for these projects, with reinsurance from the international market. One such example is the 1982 launch of INSAT-1A, an Indian-US joint venture. Launched in 1982 via a Delta rocket, its altitude control propellant was exhausted by September of that year, leading to the abandonment of the communications satellite. ISRO lodged an insurance claim and received a payout of US$12 million

New India earns Rs 42 crore premium from satellite launches cover:

Country’s largest general insurer New India Assurance has earned around Rs 42 crore in premium so far this fiscal by providing cover to satellite launches by the Indian Space Research Organisation from the Kourou French Guiana space centre. ISRO, which kicked off the Mars orbiter mission from Sriharikota without any cover, had conducted two launches namely GSAT-7 and INSAT-3D by Arianne-5 from the French space centre in July and August this year. The company has earned a premium of around Rs 42 crore by covering these two launches. They, however, said the domestic space agency has not taken any cover for the Mars mission. ISRO has not taken any cover for the Mars orbiter mission. The space agency has taken the decision not to insure the Mars mission due to high cost involved securing the cover. ISRO doesn’t take satellite cover for its domestic launches. But it takes for launches from foreign shores, getting attractive premium for a satellite launch depends on the track record of the space agency. While a space agency with highly successful track record will pay low premium, low success rate will force the agency to pay more. When considering a rating structure for satellite insurance coverage, during the early days many insurers based their rating according to the launch vehicle. For example, if the launch vehicle being used had a one in ten failure rate, the insurance premium would be ten per cent of the gross cost. Today, insurers use statistics and computer modeling to arrive at premium rates, although data for calculations is limited. Another aspect of satellite insurance is the procedure attached to salvage. Though it is impossible to obtain monetary value from the wreckage in the event of an actual total loss or constructive total loss, many insurers rely on sharing any revenue which may be obtainable from the failed satellite with the insured.

Satellite insurance is a specialized branch of aviation insurance in which, as of 2000, about 20 insurers worldwide participate directly. Others participate through reinsurance contracts with direct providers. It covers three risks: relaunching the satellite if the launch operation fails; replacing the satellite if it is destroyed, positioned in an improper orbit, or fails in orbit; and liability for damage to third parties caused by the satellite or the launch vehicle. In 1965 the first satellite insurance was placed with Lloyd’s of London to cover physical damages on pre-launch for the “Early Bird” satellite Intelsat I. In 1968 coverage was arranged for pre-launch and launch perils for the Intelsat III satellite. Satellites are very complex machines which are manufactured and used by governments and a few larger companies. The budget for a typical satellite project can be in excess of billions of dollars and can run 5–10 years including the planning, manufacturing, testing, and launch. When considering a rating structure for satellite insurance coverage, during the early days many insurers based their rating according to the launch vehicle. For example, if the launch vehicle being used had a one in ten failure rate, the insurance premium would be ten per cent of the gross cost. Today, insurers use statistics and computer modeling to arrive at premium rates, although data for calculations is limited. Another aspect of satellite insurance is the procedure attached to salvage. Though it is impossible to obtain monetary value from the wreckage in the event of an actual total loss or constructive total loss, many insurers rely on sharing any revenue which may be obtainable from the failed satellite with the insured. Space technology also provides an additional source of revenue for the government.  However, India lags behind oter space agencies around the world in commercializing its technology. ISRPs commercial arm, New Space India Limited (NSIL), plans o sell spin-off technology to create additional resources for the department of space.  But that is a long way off.

The military satellite named GSAT- 7R is worth Rs 1,589 crore and includes both launch cost and procurement of necessary infrastructure on the ground. It is expected to launch within a year. The GSAT 7R, which will be designed to be compatible with a variety of platforms including future submarines of the Indian Navy, will eventually replace the first dedicated Indian military satellite, the GSAT 7, which was launched in 2013. The current satellite the GSAT 7 is being used for communication between all strategic platforms of the air force, including fighter jets, drones, and early warning aircraft. The GSAT 6 is used for communication by ground forces. India has been increasingly expanding its presence in space with the usage of a series of dual use satellite from the CARTOSAT and RISAT family that are used for surveillance. In April 2019, ISRO launched the strategic EMISAT designed to pick up electromagnetic signals and is likely to be used for communication interception and detection of enemy assets. India’s greatest achievement in this field was when an Anti-Satellite Test was carried out on March 27, in which a ground-based interceptor successfully destroyed a low earth orbit satellite. India will put into orbit another of its sharp-eyed surveillance satellite RISAT-2BR1 with synthetic aperture radar on December 11. The next space mission is to orbit RISAT-2BR1, a radar imaging satellite. Piggy backing on the 615 kg RISAT-2BR1 in the Polar Satellite Launch Vehicle (PSLV) would be four foreign satellites that India will be carrying for a fee. Another radar imaging satellite 2BR2 with synthetic aperture radar will soon follow after December 11 mission. A clutch of such sharp-eyed satellites are necessary to look down at the earth on a continuous basis.  In May this 2019, ISRO launched 615 kg RISAT-2B. The next radar imaging satellite – RISAT-2BR2 – expected to be launched soon will also have two small foreign satellites are piggyback. ISRO has earmarked $1,600 million for launch vehicles, of which $870 million will be for PSLV and the remaining for Geosynchronous Satellite Launch Vehicle, he revealed. ISRO has planned some 50 RPT 50 Polar Satellite Launch Vehicle launches in the next five years. Budget has always been a constraint in satellite insurance. Space is an engine of growth. Liberalization of space is needed in the national interests, the private sector should be allowed in all the sectors of the space industry. This is high time to encourage the private sector to play a potent role in the country’s space sector and to enact the legislation for the same.

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