Experts: Space tourism faces challenges from insurance companies

The personal spaceflight business — also known as space tourism — will face high hurdles from the insurance business in its early years, according to several industry experts.

The personal spaceflight business — also known as space tourism — will face high hurdles from the insurance business in its early years, according to several industry experts.

Policy costs will be extremely high until companies fly without incident at least three times. And a string of early failures may well doom startups to business failure, one of three insurance experts on a panel about the subject said during a panel discussion at the Federal Aviation Administration’s annual Commercial Space Transportation Conference.

“In the beginning rates are going to be high. They are going to be very high,” said Raymond Duffy, senior vice president at Willis Inspace of New York. “Once you show a positive result the rates will come way down.” Duffy noted that early failures, whether by one company or by several, could make it almost impossible for the new industry to get insurance. He urged the personal spaceflight companies to reduce risk as much as possible across the industry.

Ralph Harp of Falcon Insurance, Houston, said personal spaceflight companies needed to make sure they present a very detailed “picture of what you are going to do” as the industry gears up to send its first sets of customers into orbit. Insurers possess very little data about the extent or nature of the risks the new industry might face since there have been so few events beyond the space tourists who have flown to the International Space Station. “The better you can explain it, the better you are going to do” when buying insurance, Harp said.

George Whitesides, senior advisor to Virgin Galactic, told Space News after the panel finished that his company “has had positive discussions with insurers.” They have told Virgin that the business model for the insurance seems sustainable.

Brett Alexander, president of the Personal Spaceflight Federation and a member of the insurance panel, said a “sustainable rate” for insurance would be built into the business models of the spaceflight companies.

Duffy added that, while the early days would be challenging, the insurance industry and the personal spaceflight companies probably would find ways to mitigate risk and manage the costs. Pam Meredith of the firm of Zuckert Scoutt & Rasenberger of Washington said the new companies must insist on extremely detailed policies since any exculpatory clauses — those that might provide liability protection — “must be very strictly and carefully written.”

She said state and federal legal exemptions, such as those in the federal Commercial Space Launch Act, would not necessarily protect the companies from liability since the insurance companies may find “ways of getting out of the laws” by focusing on where the accident occurred, where the accident was caused, where the parties are incorporated or where the contracts were signed. “So unless you have the protection of laws signed in all 50 states you don’t have much protection,” Meredith said.

Duffy said it will take the industry 10 to 15 launches before the insurance companies are comfortable with the level of risk they face. He said government subsidized rates would help both the insurance companies and the personal spaceflight business.

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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