An ever-swelling amount of space debris is threatening satellites that orbit around the Earth, making insurers leery of offering coverage to the devices that transmit texts, maps, videos, and scientific data, industry sources said.
Space debris or space junk is a growing issue that actually started with the first space missions 65 years ago. The problem has grown to the point that, according to NASA, approximately 23,000 pieces of debris larger than a softball are orbiting the Earth.
They travel at speeds up to 17,500 mph, fast enough for a relatively small piece of orbital debris to damage a satellite or a spacecraft. Keep in mind that anything larger than 1 centimeter (0.39 inches) can damage or destroy satellites.
“This is a real issue for insurance,” said Richard Parker, co-founder of Assure Space, a unit of AmTrust Financial.
According to Reuters, over a year ago the company stopped providing low-earth-orbit (LEO) spacecraft insurance, which is where most of these satellites orbit.
“It may start to get difficult to get that type of coverage in the near future as more insurers realize that this is a significant risk that we can’t even get our arms around,” Parker told Reuters.
according to Seradata, which tracks the statistics, 8,055 satellites are currently in orbit around the earth, most of them in LEO, which extends 2,000 kilometers, or 1,243 miles, beyond Earth. Yet about 42 percent of them are inactive.
And the number of active satellites has jumped 68 percent from a year ago and more than 200 percent from five years ago. The Insurance Journal notes that much of the new activity has come from billionaire Elon Musk’s SpaceX, as it expands its Starlink broadband network.
There are other sources of satellites in LEO, including companies such as Google, Apple, and Amazon; as well as telecom providers, government agencies, and universities working on space research, insurance sources said.
Space coverage has been a lucrative niche for insurers
Last year, insurers took in $475 million in gross premiums to cover satellites, rockets, and unmanned space flights and paid out just $425 million, according to Seradata.
And according to Denis Bousquet, an executive in AXA XL’s space business, about half of new satellite launches now have insurance. Typically, a LEO satellite is much smaller than a GEO (Geostationary Equatorial Orbit) satellite.
LEO satellites are about the size of a small refrigerator, and need $500,000 to $1 million worth of coverage, far below the $200 million to $300 million for those in the GEO, industry experts said.
Usually, according to the StarPhoenix, insurers protected devices against loss, failure, or damage from launch through their orbiting life, but not revenue losses from outages. Operators could add liability coverage in case one satellite damages another or re-enters the atmosphere in a way that causes damage or injury on the ground.
However, the bottom line is simple. Insurers predict risks over the life of current and future policies, while space underwriters fret over doomsday scenarios years ahead. They worry about the possibility of a “Kessler effect”
The “Kessler effect,” was named for NASA space debris expert Don Kessler who developed the theory in 1978. It anticipates LEO becoming so crowded that there is a cascade of collisions.
“The concentrations of debris and increasing numbers of satellites being deployed are increasing the potential for collision,” said Charles Wetton, underwriting manager for space policies at insurer Global Aerospace.
And some policymakers and insurers believe that a major collision will occur within the next three years, rendering insurance nearly impossible to obtain. This begs the question – Who will end up bearing the financial responsibility?
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