In many ways, space insurance mirrors maritime insurance. This should come as no surprise. In the early 1960s, when the US government created the Communications Satellite Corporation to kick-start the satellite industry, it realised it needed financial protection to make this incredibly expensive and risky venture commercially viable.
The US turned to Lloyd’s of London – the undisputed king of global maritime insurance. In 1965, Lloyd’s wrote the world’s first space policy: a pre-launch insurance policy for the world’s first commercial communication satellite, Intelsat I, also known as Early Bird.
Lloyd’s was the natural choice because of the nature of space and maritime commercial ventures; both deal with massive, high-stakes concentrations of risk. A single cargo ship or satellite launch can be worth hundreds of millions of dollars. Because catastrophic losses are, thankfully, rare, insurers face a scarcity of actual data. They cannot price policies using statistical databases such as those relied on for automotive or health insurance. Instead, space and maritime insurance rely on highly bespoke risk assessments.
In maritime law, if a ship is so badly damaged that salvaging it costs more than its worth, the owner declares a constructive total loss and abandons the wreck to the underwriters, who pay out the claim. The same principle applies to space insurance. If a satellite reaches the wrong orbit or burns through its fuel ahead of schedule – drastically reducing its operational lifespan – the satellite company will declare a total loss and file a claim. In space, just as at sea, loss is often absolute.
